More aspire to enter BTL market but are ignorant of tax consequences

Almost half of home owners aspire to become private landlords, but do not understand the tax implications, Mark Howell, commercial director of Bank of Ireland UK Mortgages, has said.

As the market anticipates that pensioners may head into the buy-to-let market following the pension freedoms next April, Mr Howell said that many people making the move do not understand the potential implications of income tax, capital gains tax or inheritance tax on their finances.

He said: “It is important that people seek financial advice on tax matters before making big financial decisions or investments, such as buying a property to let.”

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Commenting on research done by the bank, which looked at the current buy-to-let landscape, he said: “Our research identified a massive knowledge gap in the area of buy-to-let mortgages, which is particularly concerning as the market is currently experiencing growth.”

The research, which polled 200 property owners in June and September this year, showed that 13 per cent of pensioners would use the lump sum to pay off the balance of their mortgage, while more than 29 per cent said they would purchase a buy-to-let property to generate rental income for retirement.

Pensioners in London are the most property-hungry, according to the research, with 47 per cent saying they intend to purchase property with the lump sums from their pensions.

The research also revealed that consumer confidence was growing among existing home owners, with 91 per cent of property owners stating that their mortgage payments were “easily affordable”.

According to the Council of Mortgage Lenders, there was a 32 per cent increase in buy-to-let loans year-on-year to August 2014.

Buy-to-Let Market Index

Index Values in June 2014

Index Values in September 2014

Mortgage Affordability Index (MAI)



Property Prices Index (PPI)



Rental Values Index (RVI)



New Purchase Index (NPI)



Adviser View

Mike Richards, director of London-based Mortgage Concepts Associates, said: “It is interesting as there were figures flying around that in the next five to six years there will be five million people with interest-only mortgages that they cannot repay, which is a lot of people.

“There will be many wanting to invest in property, and use their pension for this. Most pension funds invest in property, but this will give them more control and something to do in retirement. In both cases there are tax implications, and the ability to offset a lot of costs of running a property against income. So one needs not only to seek financial advice, but also advice on whether they can cope with running a property, which is lot of work and stress.”