Jeff Prestridge  

Learn to love landlords

Jeff Prestridge

Jeff Prestridge

Love later life. It is a beautiful sentiment that is currently being used by Age UK, a charity which does invaluable work in fighting the corner of the elderly.

I say, long may this charity continue to thrive with its mix of helpful advice and campaigns to combat important issues such as loneliness and good health in retirement.

It is a shame, therefore, to see that this government is making it more difficult for people to put themselves in a position where they can love later life.

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It is doing this by steadily chipping away at our ability to build a portfolio of long-term investments that will see us through retirement.

Its clampdown on our pensions reminds me of John Wyndham’s The Day of the Triffids. Blinded by the fact that we get generous tax relief on our contributions (thank you Mr Hammond), we then fail to notice a series of measures introduced to stymie our ability to build retirement wealth.

The pension triffids are everywhere – in the form of the tapered annual allowance for high earners, a shrinking lifetime allowance (once £1.8m, now £1m) and a nonsensical money purchase annual allowance that could be set at £4,000 by the time the new tax year starts. 

Of course I say all this before this week’s Budget so forgive me if Mr Hammond has done something quite amazing to reignite the pensions savings habit so that we can all look forward to loving later life.

Property under siege

Yet pension deprivation is only part of the story. Making money from investing in property is now under siege.

In recent years, tens of thousands of Middle Englanders have turned to property to broaden their investment portfolios and generate a good income, now and into retirement.

They have become landlords and on the whole they have done very well out of it on the back of strong tenant demand, low interest rates, rock-bottom mortgage costs and continuing house price inflation. The result is a burgeoning private rented sector, comprising 5.2m households, double the size of 16 years ago. Recent research conducted by Paragon Mortgages indicates that the average loan-to-value stands at 37 per cent with average gross income standing at about 6 per cent.

A success story then; one we should be proud of as a nation. Financial empowerment and all that, while fulfilling an increasing need for rented accommodation. Something we should be encouraging more of.

But not this government. It has now got its claws into landlords and wants its pound (multi-million pound) of flesh, in the form of tax revenues. Since last April, as part of a five-point plan to help more people buy their first homes, it has applied a higher rate of stamp duty on purchases of buy-to-let properties. 

Draconian taxation

Worse is to come. Between this April and April 2020, the taxation of rental income will become more draconian. As a consequence, landlord profits will be squeezed. In some instances, profits will be turned into losses. Some buy-to-let investors will simply sell up and walk away from the sector.