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90 seconds with Marijana Molnar on… Is buy-to-let still a good investment?

If you are thinking of buying an investment property as an individual, there are a number of things to consider before committing to such a venture.

Stamp Duty Land Tax surcharge

Since the 1st April 2016, anyone purchasing a property in addition to their main home, will pay an additional 3% in Stamp Duty Land Tax on top of the standard rates. Below is a summary comparing the rates currently payable:-

Band Standard SDLT rates Additional property SDLT rates
£0-125k 0% 3%
£125-250k 2% 5%
£250k-£925k 5% 8%
£925k-£1.5m 10% 13%
£1.5m+ 12% 15%

 

Other costs

Costs (e.g. legal fees, letting agent fees, survey fees etc.) and mortgage repayments, as well as the cost of improvements to provide suitable housing for tenants to live in, should be factored into your budget.

Rental yield

Rental yield is a key consideration for any prospective buy-to-let landlord to ensure that you will be able to both repay any mortgage debt, and hopefully to also profit from your investment.

Tax implications

If you sell the property for more than you paid for it, after deducting costs such as Stamp Duty Land Tax, estate agent and solicitors’ fees, you will potentially be liable to pay Capital Gains Tax on any profit that you make. You may also be liable to pay Income Tax on the rental income you receive. Speak to an accountant about the liabilities you may face.

According to a recent survey by a reputable estate agency, as many as one in four of us will be renting by 2021. Buy-to-let could therefore still represent a major investment opportunity. However, you should always consider all the implications, to ensure that it is economical and practical for you.

This article was written by Marijana Molnar

Please note the contents contained in this article are for general guidance only. Legal advice should be sought before taking action in relation to specific matters.

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