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Concerns about rising interest rates as well as raft of legislative changes could unlock £28billion as half a million ‘amateur’ landlords look to exit the market and sell buy to let properties

With most buy to let landlords operating on a very small scale, 60% have just one property, the regulatory changes are taking their toll, persuading one in five to reduce their exposure or sell up and get out of buy to let property altogether.

The phased removal of mortgage interest tax relief and its replacement with a basic rate tax credit has already contributed to a squeeze on the profits of landlords. And with one in five landlords (22%) 1 already failing to make a profit, the prospect of further interest payments if and when base rate rises, has prompted a re-think to this type of investment.

Steven Cameron, Pensions Director at Aegon, commented: “The landscape for landlords has changed significantly in the last two years. The introduction of a 3% stamp duty surcharge in April 2016 and the phasing out of mortgage tax relief for landlords has reduced the attractiveness of the buy to let market, hitting landlords in their pockets.

“Having a buy to let property has been seen by some investors as an alternative to saving in a pension. Investors turned to the property market in a bid to secure better returns as property values rose considerably, albeit with significant geographical variations. However, tax and regulatory changes and the prospect of rising interest rates is prompting 1 in 5 to consider selling.

“Those planning to sell should give early consideration on what to do with the proceeds. For those who planned on it to fund their retirement, the obvious choice would be to put it into a formal pension.

“With the average property price sitting at £225k, releasing one quarter of this on sale means the individual could pay £56,250 into a personal pension ‘net’ of tax. For higher rate taxpayers, this turns into £93,750 after claiming tax relief. While there’s a cap of £40k (or earnings if lower) on how much can be paid into a pension each year, those who’ve not used their allowance in the previous three years can ‘catch up’ meaning they can pay in up to £160k including tax relief.

“This is a complex area with significant sums involved and we’d always recommend seeking professional financial advice.”

• One in five (21%) buy to let landlords plan to sell up in the next five years
• 22% are worried about meeting mortgage payments if interest rates rise
• Modest estimates suggest buy to let investors set to release £28 billion equity from property sales
• Investing proceeds of 25% of average house value of £225k into pension could generate £93,750 for higher rate taxpayers


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