Is it time to cash in your buy-to-let? We take a look at whether the figures still add up for landlords
If you're a buy-to-let investor, you'd be forgiven for feeling rather despondent following the Chancellor's recent crackdown.
A stamp duty hike for buy-to-let purchases has already arrived - with a corresponding spike in sales beforehand - and mortgage interest relief for tax on rental income will start to be hacked back next April.
Off the back of a tax squeeze on both purchases and income, you may even be thinking of quitting life as a landlord altogether. But is selling up and cashing in any profits a wise move?
We take a look at the questions investors need to be asking themselves before taking a decision about the future direction of their property portfolios.
The buy-to-let squeeze
Amid the policy changes that are being introduced, the two that will have the biggest financial impact are the extra 3 per cent stamp duty due on buy-to-let property purchases and the reduction in tax relief available to landlords.
Stamp duty
For those buying a new property, the extra stamp duty charge, which arrived on 1 April this year, could be largely absorbed by capital gains made by an increase in house prices or by raising rent, says accountants BlickRotherberg.
Nimesh Shah, a partner at BlickRotherberg, explained: 'We're concerned that this will lead to higher rents, which is exactly what the Government was hoping to avoid by introducing these changes.'
However, it is worth noting that while a rise in house prices of more than 3 per cent in the first year would offset the extra stamp duty, the tax must be paid at the point of purchase.
Extra money that goes on stamp duty is cash that can't go towards a deposit - so the new surcharge does represent a significant barrier to entry.
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