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In recent years, property has been viewed as an ideal investment asset. In 1980, the average house sold for just £19,273. That compares to £239,927 in 2020 - a staggering 1,145 percent increase. Against that backdrop some investors have begun to assume that property prices only move in one direction: up.

And this seemed true, for a while at least. For the past decade or so, prices have risen pretty consistently. Popular culture has reflected that: television is awash with property shows such as Homes Under the Hammer and Escape to the Country. Meanwhile, as asset prices have been sweeping upwards, interest rates have stayed at near zero.

But the market may be turning and property might no longer be the golden investment goose it once was. Interest rates, designed to curb inflation, have gone up 14 consecutive times since late 2021, pushing up the cost of borrowing. Buy-to-let investments have also regularly featured in recent Budgets and Autumn Statements - and not in a good way!

Recent tax changes for landlords

As a landlord, any income you receive as rent is taxable and must be declared as part of your self-assessment return. Since April 2020, the way landlords are expected to declare their rental income has changed, resulting in higher tax bills for many buy-to-let landlords. Nor are landlords able any longer to deduct their mortgage expenses from rental income to reduce their tax bill. Instead, they now receive a tax-credit based on 20 percent of their mortgage interest payments. This means higher or additional-rate taxpayers are no longer able to claim back tax on their mortgage repayments. There’s also higher Capital Gains Tax (CGT) on a second property than on any other type of investment.

Other costs affecting buy-to-let landlords include: additional Stamp Duty Land Tax (SDLT) on purchase, dependent on value of a property; letting agent fees; maintenance and refurbishment costs; landlord insurance; gas and energy checks and safety certificates; and estate agents and legal fees on sale.

There are other potential clouds on the horizon for buy-to-let landlords. The Renter’s Reform Bill, introduced to Parliament in May 2023, is set to remove section 21 orders. These allow landlords to carry out ‘no fault’ evictions. Just 22 percent of BTL landlords support the policy, and a quarter say they will sell all their properties if it becomes law.
Should Labour win the next general election - which must take place at the latest by the end of 2024 - they are unlikely to make things easier for owners of second properties.

Liquidity is another factor that’s worth considering as an investor. If you put your money into a property and then desperately need it, it won’t be available - not unless you sell the property, or take out a mortgage, which takes time. Moreover, if you sell the property during your lifetime there will usually be CGT, whereas if you hold onto it there won’t be CGT but there may eventually be Inheritance Tax (IHT).


Owning buy-to-let property is a whole different ball game compared to owning your own home and living in it. It’s also a different ball game compared to just a few years ago. For the foreseeable future, owning a buy-to-let property is unlikely to be the investment opportunity it once was, and there may be better places for you to invest your money.

Investing in a pension

While the government is currently levying higher taxes on landlords, it’s incentivising people to invest in pensions. Individual contributions to a pension receive tax relief at the marginal rate of the investor. Moreover, unlike with income from inherited buy-to-let properties, which is liable for income tax, pension funds can be cascaded through generations and are usually free of IHT. Investment returns on a pension fund are also free of both income tax and CGT.

Other reasons to invest in a pension

Pensions are a tax-wrapper in which various asset classes can be easily purchased, held, switched and sold. Thus (and in contrast to a property) if your situation changes the money is usually available right away in retirement.

Feel free to speak to one of our specialist advisors if you would like to talk through your investment options.

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