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Is the buy to let boom over?

With new stamp duty charges come to effect and higher rate tax relief ending for mortgage payments coming in 2017, is buy-to-let in the government's firing line?


Since the emergence of buy to let mortgages in the mid 1990s, the number of buy to let landlords rocketed, with the private rental sector more than doubling in size.

Now though, the government is gradually introducing new legislation in a bid to make buy to let a less attractive investment and free up homes for first time buyers.

Notably this is taking the form of the recent second home stamp duty rise, announced in the 2015 autumn statement, but there are more changes to come.

Stamp duty hike

As of 31 March 2016 anyone buying a property that is not their main residence will need to pay an additional 3% stamp duty, on top of the usual stamp duty charges.

This doesn’t only apply to buy to let properties, but anyone purchasing a second home.

Tax relief for landlords to end in 2017

In addition to the raising of stamp duty, high income landlords will lose out on their tax breaks.

Currently, buy to let landlords can claim tax relief on mortgage interest payments at their marginal rate of income tax (ie 20% off for basic rate taxpayers, 40% for higher rate taxpayers).

But, from April 2017 high rate tax relief on buy to let mortgage payments will be phased out over three years, until there is a flat rate of 20% regardless of a landlord’s income tax bracket.

Will buy to let mortgages be harder to get?

On 29 March 2016 the Bank of England published proposals for tougher lending rules for buy to let lending.

If agreed, these more stringent regulations could stop around one in five buy to let mortgages being issued.

At the moment, most buy to let lending is not regulated by the Financial Conduct Authority, with buy to let mortgages considered business loans with affordability determined by potential rental income.

The Bank of England is concerned this may be risky lending and could cause a buy to let bubble. So, to mitigate this risk they propose that buy to let mortgages have strict lending requirements, similar to those brought in for residential mortgages by the Mortgage Market Review in 2014.

Protection for “accidental landlords”

The buy to let market has already seen some regulation shake ups in 2016, with the introduction of consumer buy to let mortgages.

These mortgages are aimed at people who find themselves letting out property but did not aim to do so as a business venture, such as people who inherit a property or move in with a partner and wish to let out their old home.

How to become a buy to let landlord

If, despite the changes to the market, you think becoming a buy to let landlord is still the best investment for your money, take a look at our guide on how to become a buy to let landlord for a few tips and pointers.

  • James Orwell

    “But, as of April 2017 all tax relief on buy to let mortgage payments will be set at a flat rate of 20%”

    I don’t think this is true. This change is staggered over a few years, starting April 2017

    • Tom Martin

      You are indeed correct, revised the article. Thanks for flagging James!