Please Note: This Article is 6 years old. This increases the likelihood that some or all of it's content is now outdated.

Last year’s Autumn Statement made it clear the chancellor, George Osborne, planned to place severe restrictions on the thriving buy-to-let market and the recent Budget has confirmed it.

The sector grew by 10% in the first nine months of 2015, part of a wider growth pattern that has seen private rental landlords profit to the tune of an estimated £180bn over the past five years.

In an effort to regulate the industry more effectively, it was announced that the buy-to-let property market would be subjected to a significant shake up. Barclays and other important lenders within the sector were quick to tighten their lending criteria.

Rental income must now exceed 135% of interest payments (125% previously) and buy-to-let landlords must also pay an additional 3% in stamp duty across all bands from April 2016.

It was speculated that serious buy-to-let investors with portfolios exceeding 15 residential properties would be exempt from the stamp duty increase, but that’s proved not to be the case. In fact, prolific buy-to-let investors seem to be the Treasury’s primary targets.

Adding salt to the wound, wealthier buy-to-let landlords will also have their tax relief cut from 40% or 45% to a flat rate of 20% from 2017.

CGT Reduction Adds Insult to Injury

Some Budget commentators had predicted that Capital Gains Tax (CGT) would be increased to match income tax bands, but Mr Osborne actually announced a reduction in CGT from April 2016.

Basic rate taxpayers will now pay 10% rather than 18% and higher rate taxpayers will pay 20% rather than 28%. Trust CGT will also be reduced from 28% to 20%. The annual tax-free allowance for capital gains remains at £11,100.

However, compounding the misery for buy-to-let investors, the higher 28% and 18% rates will still apply to gains from residential property.

It appears the new, lower CGT rates will apply to commercial property, however. There has also been a reduction in stamp duty on commercial properties worth up to £1 million, so this could lead to a seismic shift towards commercial property investment.

What Happened to Sugaring the Pill?

The Budget usually comes with an unwritten quid pro quo agreement – what the chancellor takes with one hand, he gives back with the other. However, this certainly hasn’t been the case with regards to residential property investors and buy-to-let landlords.

The proposed changes have been fiercely contested, as you’d expect, with some landlords threatening to leave the private rental sector completely.

David Cox, managing director of the Association of Residential Letting Agents (ARLA), has echoed that sentiment;

“The new stamp duty increases will make owning buy-to-let unprofitable for a lot of landlords and will certainly make new investors think twice about purchasing a buy-to-let property.”

Many specialist buy-to-let mortgage providers, who had chosen to no longer accept new business following the financial crisis, returned to the market last year (along with other new challenger banks), but it’s likely they’ll be driven away again over the coming months.

The Silver Lining

The golden spell may be over, but low borrowing rates for the foreseeable future should mean landlords will continue to yield a good return from buy-to-let investments.

The same (very) low interest rates offer little encouragement for people to save money, so in all likelihood, investors will continue to see value in property.

As a long-term capital growth tool, residential buy-to-let still makes a lot of sense, however, those looking for short-term gains might find commercial property a more attractive proposition. Those relying on income generated by property should approach the residential buy-to-let market with caution.

As the buy-to-let market levels off, the everyday mortgage industry should experience growth due to the increased availability of properties.

The concern is that rents are likely to increase across the board as landlords attempt to compensate themselves for the extra costs they’re being hit with.

If the property market can sustain a hike in rental rates the buy-to-let market may continue to thrive, as it has in recent years, but it’s unlikely the Treasury and the Bank of England will allow this to happen. A widespread increase in rental rates would almost certainly trigger stricter and more far-reaching measures to be imposed on private landlords.

It’s too early to say whether tenants will feel the effect of buy-to-let changes the most, but value in the buy-to-let market for landlords is unlikely to be damaged in the short term. Having said that, landlords are dependent upon tenants as their source of income, so it wouldn’t be in their interest to force people towards buying rather than renting.

Article Courtesy of: Rana Miah,

Please Note: This Article is 6 years old. This increases the likelihood that some or all of it's content is now outdated.


  1. Capital growth or income stream You chose the income at 3 to 5% is okay and capital growth in south east is in my patch 15 percent a year terrific but sales prices are flat in west mids and rental income falling ( plus values ) but in the northwest it\’s an okay business 4.5% returns and 4% growth ….but the best returns for us are in south west having said that we plan to buy no more houses and slowly sell off. George, you\’ve killed the golden egg – pity someone diesn\’t kill him ! l would vote brexit to just hopefully get rid of him

    • Yes, I do agree Osborne has killed a lot if enthusiasm for the market and will then complain in a few years that there are not enough rental properties available. My son was looking at buy to let but has pulled out now. I will definitely vote for Brexit.

  2. Have been renting out 7 x 1 bed flats for just under 20 years and have just purchased 2 x 2 bed houses with pension pot. Unfortunately we have now become disillusioned with whole scene and we also will be selling up slowly. The hassle these days with younger tenants trashing the flats, not being able to ask for the overdue rent because that is called\’hassling\’ the tenant – tenants have far too much in their favour compared to the wicked landlord who is perceived as being on the rip from day one. have some lovely foreign tenants at moment tho.

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