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Buy to let investors are collecting approximately £16 billion per annum in rent from private tenants, according to an analysis from financial firm NFU Mutual.
Over 1.9 million landlords generated an income from their residential property investments in 2015-16. This number increased by 100,000 a year from 2011-12 according to financial firm NFU Mutual, who examined figures from the Office of National Statistics.
The rents obtained from buy to let were up by a third, equivalent to £4.1 billion, reaching £16.2 billion over the four-year period.
However, these figures are expected to drop as the new tax rules begin to hit the buy to let sector by 2020. Landlords in the higher tax brackets will then be paying more of their profits to HM Revenue and Customs. Furthermore, as property prices stagnate in London, rents are beginning to do the same.
NFU Mutual have therefore warned landlords who wish to sell up that they could be falling into a capital gains trap.
Chartered Financial Planner at NFU Mutual, Sean McCann, said: ‘It’s likely we’ll see the number of landlords start to plateau or even fall over the next few years as property investors start to feel the pinch from a series of tax measures that have already come into force. And if more people sell their investment properties, there are likely to be more tax charges to pay.’
He continued: ‘Many of our customers work in partnership with their spouse or civil partner to reduce their combined tax bills, taking advantage of everyone’s income tax and CGT allowances by transferring shares and property between them. It often makes sense to transfer income producing assets to a spouse or civil partner if they pay a lower rate of income tax. We’ve been warning customers to watch out for potential tax traps. In some circumstances, transferring property between spouses could trigger a stamp duty charge. Any transfer of assets to someone you aren’t married to could do the same.’