Article Posted -
18 Jul 2017

The impact of recent changes to the way buy-to-let properties are taxed could create the next pension crisis as individuals are becoming over-reliant on property to fund their retirement years, says the leading landlord body in the UK.

Seventy seven per cent of landlords – approximately 1.8 million individuals in the UK – say they are reliant on their residential property investment for their retirement1 and findings from the Mintel consumer market research report show that buy-to-let continues to be viewed as a safe way to save for later life, with almost 7 in 10 (68 per cent) people saying it represents a good way to plan for retirement2.

However, figures from the Office for National Statistics (ONS) estimate the average retired household spends £21,770 every year3, which leaves a shortfall of more than £15,000 after taking the full basic state pension of £6,359.60 into account.

In order to make up a £15,000 shortfall per year would require savings in the region of £300,000, which is why the National Landlords Association (NLA) says so many people have turned to property to provide for later life.

 

Richard Lambert, CEO at the NLA said:

“As a consequence of government policy over recent decades almost two million people are reliant on their property to fund their later years, but the changing tax regime will substantially reduce the income they receive from these investments and so compromise the retirement plans of a significant number of hard-working people.

“Around a quarter (27 per cent) of UK landlords are already retired, and 37 per cent are aged 55 or over2, so there is a pressing need to tackle these issues without delay”.

 

The NLA is calling on the Government to help those affected adjust their financial plans by tapering the amount of capital gains tax (CGT) landlords will need to pay when they come to selling their property, based on how long they have owned and let it out for.

 

Richard Lambert added:

“Landlords who have invested in residential property for the long term are different from short-term speculators who buy and develop properties, and this should be recognised when it comes to how much capital gains tax they pay when they decide to sell.

“It is not always in the best interests for landlords to continue to manage residential property into later life. A capital gains relief like we propose would provide an incentive to sell, allowing people to sell poorly performing properties and potentially purchase an annuity or invest in more liquid, lower risk assets to fund their retirement instead”.

 

For more information and the NLA’s recommendations, please visit the website.

 

-ENDS-

 

1NLA BDRC Continental Ltd Quarterly Landlords Panel, Q1 2017

2BTL Mortgages UK, Mintel, April 2017 – seven in 10 people without a rental property, but with an expressed interest.

3ONS, Family Spending in the UK 2017

 

Comments

Submitted by 90833 on 28 July 2017 - 9:31pm

I believe that it is deliberate Tory policy to impoverish the vast majority of the population.
Any way the ordinary hard working person has of investing for the future has been sabotaged, and young ambitious people are saddled with student debt which will take them years to repay if at all.
Small landlords are now being squeezed out of the market, and private buyers now have to put up enormous deposits, a crash in house prices is now inevitable and large corporations and hedge funds are now waiting like vultures.

Submitted by 123629 on 28 July 2017 - 6:45pm

Like others the properties that I have as but-to-lets are a part of my pension plan --- it is wrong of successive governments to continually erode this planned income stream.

I have made provision for my retirement (having worked for over 40 years) and to now find that the Conservative Government appears to be worse than the previous socialist governments really sticks in my throat to the point that for the first time ever I am debating voting for Labour as a protest ... I don't agree with Corbyns policies but I can't just sit by and let the conservatives erode my retirement - and by the way impacting the next generation as well.... for example my son has started to buy properties to rent as a future investment (its not a get rich quick scheme as some politicians seem to think). He is now thinking of selling up... what if we all do that? where will families stay? There aren't enough government houses around

Its very short term thinking by politicians

Submitted by 53639 on 28 July 2017 - 12:54pm

Assuming the property has been let and held for perhaps at least 5 years ? If a landlord sells, C.G.T. should be calculated on the profit less an allowance for inflation during the time held as a significant amount of the "profit" will in fact be nothing more than inflation. Osborne's so called "reforms" in the 2015 budget and Hammond's subsequent failure to reverse them seem to be focused on hitting the typical Tory voter. This was probable why they did so badly in the election, yet they persist with the policies, WHY ? I believe that there are several large property companies that have identified the P.R.S. as a growth area they would like to move into. In order to do so they must first do all they can to wipe out the competition, i.e. the small independent landlord, in order to do so they must persuade government to introduce measures, like withdrawing tax relief on mortgage payments and increasing stamp duty. In order to persuade governments do see things your way it helps to make large donations to the political party the government represents ! How do we get to the bottom of this ? ...well... you could lodge a request under the freedom of information act asking about sources of funding but you would probable be told that it does not apply to political parties as they are not funded by public money ! If so you might ask for a judicial review of the relationship between the government of the day and the party it represents as regards the party's funding sources while in government ? and / or you might buy a few shares in the property companies you suspect are making large donations to the governments party and start asking some pertinent question at their A.G.M.'s All this will take money of course but as it's hitting 1.8 million landlords a bit of crowd funding would probable cover it ! What do you think folks ?

Submitted by 53918 on 28 July 2017 - 12:15pm

Completely agree that private I individuals who have invested in PRS Buy to Let are being severely disadvantaged by recent tax changes. I am reliant on my portfolio for retirement finance. I have also always offered 5 star service to tenants. It's horrible to be villified as some sort of evil capitalist, taking advantage of vulnerable people while the reality is a win win on both sides - mine & tenants, who don't want to buy at this stage of life - which has come about due to my own planning and hard work. I don't mind paying tax that is due on income. What is unfair and very troubling is changes, like not being able to offset costs anymore. These changes should be reversed, except for any landlords who do not look after properties and tenant needs.

Submitted by 53918 on 28 July 2017 - 12:15pm

Completely agree that private I individuals who have invested in PRS Buy to Let are being severely disadvantaged by recent tax changes. I am reliant on my portfolio for retirement finance. I have also always offered 5 star service to tenants. It's horrible to be villified as some sort of evil capitalist, taking advantage of vulnerable people while the reality is a win win on both sides - mine & tenants, who don't want to buy at this stage of life - which has come about due to my own planning and hard work. I don't mind paying tax that is due on income. What is unfair and very troubling is changes, like not being able to offset costs anymore. These changes should be reversed, except for any landlords who do not look after properties and tenant needs.

Submitted by 11881 on 28 July 2017 - 10:56am

Absolutely agree. We bought six properties in 2005/6 to help fund our retirement. 4 of the 6 were student lets which are much more labour-intensive. We are now both in our sixties and cannot and do not want to continue to run this business in the same way so we have sold three of the student lets (over 3 tax years) and have now reduced our debt from £1.2M to just over £300K. We shall either have to sell one of the three remaining by 2020 to annul the mortgage debt, or refinance. We shall do the maths nearer the time! Yes, we've gained and yes we've paid tax on the incomes and tax on the capital gains - as we expected to! But, we are angry that landlords are being penalised with the various taxation changes and that, as usual, the government adopts a "one size fits all" strategy that benefits the larger companies, rather than those who had the foresight - and the gumption - to invest for their retirement. It's been damned hard work on top of our day jobs! And now we have retired from those and my husband does receive his pensions, I am one of the WASPIs whose state pension has been delayed by six years so am totally reliant upon rental income. And, should we wish to move house by buying something to refurbish for our retirement needs before our own house is sold... we have to find an extra 3% stamp duty (refundable, I know, but that is not the point...). Penalised at every step!

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