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Insight & Opinion

Experience Invest research shows that investors still prefer property in the face of taxation changes

Author: Staff





Property remains the most prevalent and popular investment option for buyers, even as taxation changes threaten to damage the prospects of the market.

Research shows a lack of knowledge still exists when it comes to taxation, and the majority are unaware of changes.

New research from Experience Invest has found that even though the government is once again moving the goalposts for property buyers, more would still rather invest in property than other traditionally popular asset classes.

On April 6th, the government’s new rules on mortgage tax relief came into play, with landlords no longer able to deduct their mortgage interest payments from taxable income, which could lower profit margins for those in the private sector. But in spite of the high-profile changes, many are unaware of the new rules, and others remain unperturbed.

Property remains king for UK investors

According to the Experience Invest research, even though property margins in the sector are likely to be lower than they have been in recent years after the mortgage tax relief rules change, many buyers still see property as the most viable asset class for investment.

Of those surveyed, as many as 45 per cent said they would choose to invest in property, even in spite of the changes. This figure, reaching nearly half, far outstripped the number who said the same of Individual Savings Accounts (ten per cent), gold (nine per cent) and stocks and shares (eight per cent), showing just how strong property remains in the current marketplace.

The research also shows that UK property in particular also still remains a popular choice. Although the tax changes may hurt the profit margins they receive, 93 per cent of prospective property investors in the UK told Experience Invest that they would still choose to buy British property over foreign alternatives.

Knowledge levels remain low

In spite of property remaining the most popular option, the research also showed that there is a lack of knowledge when it comes to what the taxation changes will mean for landlords and investors. It’s expected that high-band tax payers will be worst hit, but the research shows that many have little in the way of knowledge around the matter.

Of those surveyed, as many as 85 per cent said they did not know anything about the new tax rules or what they would mean for the market, indicating that the government needs to do yet more to promote knowledge in the sector.

“Seek specialist advice”

With the levels of knowledge in the sector as low as they currently are, Ray Boulger, mortgage market guru, said landlords must seek out the right advice to ensure they are making the right choices moving forward.

“Now is a good time for landlords to seek specialist advice as there is not a one-size-fits-all solution,” he said.

“The new way to calculate income may push lower rate tax payers into the 40 per cent tax bracket. There will be a substantial effect on landlords who receive child benefits – especially those who have more than one child – and for those who will find themselves in the 45 per cent tax bracket.

“For new purchases setting up as a limited company is one option, as properties held in a limited company structure still qualify for tax deductible mortgage interest rates.
“However, the impact of Capital Gains Tax and Stamp Duty Land Tax will often mean it is not worth switching properties already owned to a limited company structure.”

Tenants remain positive

The research also discovered that even though there has been widespread negativity about what the changes to the property tax rules would mean for the market, many tenants currently remain positive about the future.

Almost a third of British people now live in rented homes, and it was predicted by many that the tax changes would mean the majority facing rent hikes. But the Experience Invest research found that most are not fearing such an outcome.

Some 51 per cent said they feel that housing is already largely unaffordable across the country, and as a result, the vast majority do not expect rents to rise much more. As many as 86 per cent said they do not expect to see their rent rising as a direct consequence of mortgage tax relief rule changes.

Experience Invest has created a new 2017 UK Buy-to-Let Guide for landlords who would like more information about the recent policy changes.

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