Yesterday’s budget confirmed what many property investors already knew was coming – a capital gains tax surcharge when selling their properties in the future. Despite cutting capital gains tax by a significant margin for investors (slicing the basic rate from 18% to just 10%, and the higher rate from 28% to 20%) – gains made on residential property will not benefit from these reduced rates.
The official Budget statement on the matter declared that the decision ensured “that CGT provides an incentive to invest in companies over property.” With the government openly stating their desire to discourage property investment in the UK, the big question is: What does the future hold for property investors and landlords?
The Implications for Landlords
The Budget announcement understandably leaves many landlords across the country wondering why their property investments are being penalised – yet other investments are being rewarded with one of the lowest CGT rates in Europe. As Tina Riches, tax partner at accountancy firm Smith & Williamson, succinctly puts it; the move is “yet another disappointment for those invested in residential property who fail to benefit from this latest initiative.”
The announcement, combined with the impending changes to stamp duty (set to come into action in April), is leaving many landlords wondering whether property is the best place to invest their money – and if so, how to ensure a secure financial return.
Property Investment in the UK – Some Tips for the Future
Whilst stamp duty is set to increase, the same is also true for rental yields. Average rent rates have been rising across the country, which in the long term, may offset the initial expenditure of additional tax.
If you’re considering starting or extending your property portfolio, here’s a few tips to ensure you enjoy a good ROI, despite the tax changes.
1)Shop smart. If you’re looking for investment properties in London, or indeed any location in the UK – think smart when purchasing. Whilst there may be some bargain houses in the estate agent’s windows, it’s unlikely that you’ll find the real property investment opportunities there. If you’re serious about building a portfolio, work with a property investment agent – as they’ll often have properties on their books that aren’t available on the general market, at a greatly reduced price.
2)Property auctions. Buying a house at auction is another way to secure a good deal – especially if you’re willing to purchase a property that requires considerable cosmetic or structural improvement. Of course, nothing is guaranteed at a house auction – but pick the right day for it, and competition could be minimal – meaning you can buy a property at a much cheaper price.
3)Ask for advice. The important thing is to source properties that are cheap to purchase, whilst offering room for capital growth and strong rental yield. Locate up-and-coming areas, locations that are being regenerated, or are likely to experience a surge in popularity in the future. These are the places that will generate good returns. If you’re unsure – don’t be afraid to ask for advice, or attend a property seminar to learn more about the market.
The Buy2Let Shop in Bromley
If you’re keen to learn how to get a good return on your property investment in the UK, talk to The Buy2Let Shop today. We’re professional property investment agents in London, and we’ll help you identify properties that offer solid ROI – both in terms of capital growth and rental returns.
We can also offer assistance with buying a house at auction, and regularly run property seminars in London to help boost your knowledge of the market.