SCOTTISH AMERICAN INVESTMENT COMPANY
/ BUY TO LET /
“But some people believe they don’t
have to invest for retirement because
they have a property and this is not a
sensible approach,” he adds.
“There are big risks here with how
to live off this asset. There are costs
associated with downsizing and
they may have to move away from
family and friends.”
WIPE OUT
Kerry Nelson, managing director
of Nexus IFA, says there are many
practical problems with property
as well that you don’t get with most
other asset classes.
“I know someone who owns a
property who did all the reference
checks on one tenant, which came
back fine – yet the tenant went on to
cause £30,000 of damage,” she says.
“That’s wiped out returns for
five years – you just can’t account
for stuff like that. A lot of people
who own property don’t have the
time to manage it, so they employ
a property manager – but this is yet
another layer of expense.”
However, Connolly admits
that despite these problems with
4
“I know
someone
who did all
the reference
checks on one
tenant – yet they
went on to cause
£30,000 of
damage”
physical property as an asset class,
it has been quite rare that things
haven’t worked out for his clients
who make money from buy-to-let.
“Some people haven’t made as
much as they would have liked,
but there have been no out-and-out
catastrophes so far,” he says.
“Having said that, this has been
in an environment where house
prices have gone up and up and
up. If they stagnate or start to go
down, combined with all the raft of
changes to tax on buy-to-let, there is
a decreased likelihood this will still
be the case going forward.”
TAXING TIMES
It is these changes to buy-to-let tax
rules that have made many landlords
finally sit up and take notice –
warnings about relying on property
in retirement have repeatedly fallen
on deaf ears over most of the past
decade as the asset class continued to
appreciate in value.
Whereas before April, landlords
could offset all of their mortgage
interest against rental income before
tax, higher-rate taxpayers can now
only offset 75 per cent of this figure
– this will drop to 50 per cent next
year, 25 per cent in 2019 and zero in
2020. They will instead receive a tax
credit equal to 20 per cent of their
interest costs, which means higher
and additional rate taxpayers are
likely to pay far more as they would
have qualified for up to 45 per cent
tax relief under the old system.
While the landlords hit hardest
by the changes will be those that
already pay higher-rate income tax,
some basic-rate taxpayers will be
nudged into the higher-rate bracket
once their rental income is included
in their total earnings.
Research carried out by online
lettings agency Upad suggests that
the average landlord will pay 13
per cent more tax in the 2018/2019
financial year than in 2017/2018.
Andrew Montlake, director at
mortgage broker Coreco, says
these tax changes represent
one of the biggest challenges
to landlords and have already
caused the number of buy-to-let
purchases to fall massively.
“To be fair, this is what the
government wanted,” he says.
trustnetdirect.com
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AGAIN AND AGAIN.
SAINTS (The Scottish American Investment Company) was founded way back in 1873 to invest in
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Please remember that changing stock market conditions and currency exchange rates
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