Simon Morris Discusses Implications of the Budget for Buy-to-Let Landlords

By Simon Morris On Friday, July 17 th, 2015 · no Comments · In , ,

UK Chancellor George Osborne has announced the emergency summer budget. Property specialist Simon Morris recently took the time to discuss how this would affect buy-to-let landlords.

Emergency summer budget

David Cameron’s Conservative Party gained a majority of seats in Parliament for the first time since 1997 in May’s national general election. This gave UK Chancellor George Osborne the right to implement his fiscal policies, which he recently started to do when he announced the emergency summer budget.

His speech included a number of policies which relate to the UK property sector. These policies included:

  • Increasing the threshold for inheritance tax: Osborne announced a new threshold of £175,000 on homes bequeathed to children or grandchildren, in addition to the existing limit of £325,000. This will give couples the permission to leave their children and grandchildren £1 million that won’t be taxed when they pass away.


  • Capping tax breaks for buy-to-let: At the moment, landlords in the buy-to-let sector are allowed to deduct 40% or 45% or their buy-to-let mortgage interest from their taxes. This will be reduced over four years, beginning in April 2017, to 20%; the basic rate of income tax. Osborne also announced that from April 2016, landlords will only be able to deduct the actual costs they incur from their taxable profit; before they were automatically allowed to deduct expenses for “wear and tear.”


  • The announcement of the Help to Buy ISA’s launch date: The Chancellor said that the Help to Buy ISA would be made available for first-time residential property buyers on 1st December 2015. This is a financial product that allows first time buyers to reap £3,000, courtesy of the government, for £12,000 saved in the account.

What surprised many experts is that the Chancellor didn’t use the budget as an opportunity to announce the extension of the Right to Buy scheme to every housing association tenant. This was a key property plank of the Tories’ election manifesto, along with the promise to construct 200,000 more houses for people who are looking to climb onto the first rung of the property ladder.

Implications for Buy-to-Let landlords

Simon Morris explained the implications of these announcements for buy-to-let landlords. He was quoted by the Guardian saying that “The confirmation of the launch date should inject fresh first-time buyer capital into the UK residential property market.” Best Advice reported that Morris went on to say: “Meanwhile, the raising of the inheritance tax threshold should boost the higher end of the UK’s residential property sector.

“However, the emergency summer budget posed new challenges to buy-to-let landlords. Many people have taken advantage of pension reforms to release their pension savings to invest in buy-to-let property. Now, these people need to re-calculate their potential return volumes.

“Will the capping of tax breaks or the restriction of tax deductions increase maintenance costs and buy-to-let mortgage fees? If so, landlords need to re-calculate risk vs. return, to determine whether they can generate a healthy return on their investment.”

Alternative options

Morris then proceeded to explain the alternative options investors can utilise to earn a profit by investing in the UK property market. He commented: “In light of the announcements made in the emergency summer budget, investors may want to look at alternative investment vehicles to see if they provide better returns. For instance, property bonds and funds can be profitable, particularly when they’re used within an ISA wrapper such as the new Help to Buy ISA. Not only does this strategy allow investors to benefit from certain tax advantages, but some products even guarantee initial investment.

“The emergency summer budget has made it more vital than ever that potential investors seek as much independent advice as they can before they invest, and opt for UK regulated investment products. This will allow them to make an informed decision, so that they give themselves the best chance to generate a healthy return on their investment.

“Finally, I want to turn my attention to those investors who are thinking of taking advantage of pension reforms to invest in buy-to-let. I would suggest that anyone who is thinking of removing their pension savings to invest in buy-to-let read my latest guide, which explains the advantages and pitfalls of pursuing this investment strategy.”

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