Pension tax relief cuts and buy-to-let
- 12th December 2012
- Buy-To-Let Property News
£10,000 cut in annual tax free pension contributions means savers with spare cash could favour buy-to-let.
The Chancellor’s announced a £10,000 cut in the Autumn Statement to the annual tax free pension allowance, which will go down to £40,000.
Stephen Ludlow, Chairman of ludlowthompson, comments, "Many high earners choose to top up their pension with big contributions towards the end of their careers, but this tax change makes that more expensive.
"The change means that people will be looking at alternative ways to save and buy-to-let is a very attractive option. Using extra cash as a buy-to-let mortgage is a great way of saving for retirement."
High yields are the most important factor for investors in residential property hoping to generate income for their retirement. ludlowthompson’s new buy-to-let review found that yields for the pre-owned London buy-to-let investment market stood at 7% in Q3.
Stephen Ludlow continues: "Investors using buy-to-let as a pensions type investment need to play it safe. One way to do that is to pick a location where void periods between lets are unlikely to be a problem. Our view is that easily commutable properties around the centre of London offer the best option here.
"Investors also need to decide whether to manage the property themselves or use a professional agent like ludlowthompson. That means deciding between investing time in dealing with problems that might arise or paying a fee for the agent to manage any issues on their behalf. The management fees are tax deductible, which reduces their net cost."
One advantage of using an agency to manage the property is that they can often produce lower tenant payment arrears. ludlowthompson managed properties had arrears of just 3.6% in October, far lower than many of its competitors.
Investors using buy-to-let as a pensions type investment need to play it safe.
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