[news] Chancellor announces lower Capital Gains Tax for non-residential property

In Today’s UK Budget, Chancellor George Osborne announced that Capital Gains Tax is to be reduced significantly. But the Chancellor said that Residential Property is EXCLUDED, meaning that residential landlords could pay up to 8% more in tax than commercial property owners when they come to sell.

Capital Gains tax will reduce from 28% to 20% at the headline rate and from 18% down to 10% on the basic rate. The chancellor made it clear this afternoon in his speech that this reduction excludes residential property.

Investors buying commercial property such as Purpose Built Student Accommodation and Hotel Rooms will however benefit from this 8% reduction, as well as already being immune from the 3% second-property stamp duty surcharge that buy-to-let investors now have to pay when they buy.

So when our investors come to sell their property they will stand to save up to 8% of the sale price in tax.

Another black day for Buy-to-Let

This comes as a further death-blow for support for buy-to-let residential landlords from the government. Residential Landlords already face very significant income tax increases from next year.

We now expect to see a further significant shift of property investors from purchasing residential to buying commercial property, and HighGround are well placed to meet this demand.

The residential assault continues – its no joke

Many had hoped that the buy-to-let Stamp Duty surcharge of 3% starting on April Fool’s day this year would only apply to landlords with less than 15 properties. But no, it was announced today that there will be no such limit. We’re all in this together it seems.

If you have not considered affordable commercial property investment, perhaps now really is the time. Our expertise in sourcing fully managed commercial property gives us a unique perspective.

I welcome your comments and for a one-to-one chat about how we can save you money when you buy and sell investment property, book a call with me here. (You should of course also speak with a qualified tax adviser as your circumstances will be specific to you).

Saving tax

One perfect example of where you could save tax when you buy (no stamp duty for commercial property purchased at under £150,000), when you sell (lower capital gains tax) and while you own investment property is through our flagship student property investments. Commercial purpose-built student property already has key advantages over residential Buy-To-Let, and now these financial benefits are even more clear.

To discover more about the benefits of purpose built student property as well as current trends, download our guide.

[property insight] The illusion of being in control of your property

As a dedicated fan of what we call Passive Income Through Property, one of the main questions I’m faced with from property investors is the issue of control over one’s property.

This is particularly true when speaking with UK landlords who understandably like to run their own show. What do I mean by this?

For example often when I speak to a buy-to-let (BTL) investor about say Hotel Room Investments, the questions that arise immediately run like this:

1. It’s too good to be true. How can you (ie the developer) promise something like a 10% net yield when the average buy to let Gross yield s closer to 6%? And that’s excluding management charges, insurance, agents fee, purchase costs, wear and tear, void periods, etc etc.

2. Even if that’s possible now, says the landlord, how can I guarantee the developer or hotelier can keep this up? I’m relying on the hotelier’s business model and the hotels performance. With my own property, I’m in control of all this!

3. What about my exit strategy? If I want to get out of a buy-to-let I just sell it, and usually for a decent profit.

4. Its far too risky. I know what I like and I like what I know. Haven’t there been some massive train wrecks with these types of property investment, especially overseas?

These are all very reasonable concerns of course, and on the face of it the landlord has some very valid points: After all It’s pretty easy to source and buy a UK residential property pretty much anywhere that isn’t going to be a complete disaster: even a bad decision made now will probably come right in the long term by virtue of capital growth, providing you can stick with it. On the other hand its very easy to buy a bad passive investment without expert guidance. Seems a no-brainer.

What underlies a lot of this thinking is a sense of control through ownership.

But property ownership can easliy give us just the illusion of control. Buying an investment property is one thing, living with it is quite another. 

The BTL control idea is borne out of this kind of thinking:

Principle 1: I can plan my borrowing. Fixed rate mortgages mean predicable borrowing costs. Reality: Swap rates and base rates are utterly outside of our control. There is a Bank of England base rate increase coming. Not today but it will come.

Principal 2: I can adapt or improve my property to increase rental income and property value. Reality: whilst a Good Thing to do, there is a high capital cost to this and both the rental market and resale market depend mostly on macro-economic factors such as employment levels and GDP, all outside of our control.

Principal 3: The Private Rental Sector is too important to UK PLC for the government to jeapodise it. Reality: the recent Summer budget attacked landlords tax situation aggressively, on three counts, arguably for pure political gain. The chancellor was able to do this as the majority of the population (non-landlords) seem to regard landlords as greedy, and the government will gain more support than they lose.

Principal 4: If things get too bad I can always sell up. Reality: if things are bad for you they’re probably bad for everyone, so selling may simply not be an option, just when you need to.

These are just examples, there are many more. In fact just add to this list another column for every supplier to a BTL business, such as block service charges, government regulatory controls, stamp duty, insurance.

The good news is that once property investment is recognised as a whole string of uncontrollables, these can be anticipated to some degree. The risk is still there but stress-testing your property portfolio is essential to survival in the rough and tumble world of BTL.

Passive property investment means seemly relinquishing all of this perceived control, but what are you really sacrificing? The sacrifice is perhaps going to be doing far more work up front when deciding what to invest in. The rewards of getting it right is hassle free property income.

Let me be clear, this is not about the right or the wrong way to invest in property. Buy to let investment can be incredibly lucrative over the longer term and any mistakes made at the buying stage will most likely be rectified in time. Just be mindful that whatever we buy, we do not pull many of the strings at all.

In conclusion, I believe that proper research is the absolute key to dealing with risk and understanding the control issues in any property investment, whether it’s a holiday home in the sun, a room in a Scottish Castle or a tasty rental flat in Harrow.

Off to Manchester to meet the property developers at Beech Holdings

What’s the buzz about Manchester property investment right now? I’ve a strong idea but I’m on my way right now to find out face-to-face with local property developers…

Tomorrow I meet with Stephen Beech, the award-winning Manchester property developer and chairman of Beech Holdings (Manchester)

Stephen built his reputation transforming tired and downright broken commercial buildings into state-of-the art eco-friendly residential apartments, with incredibly low energy bills. As well as contributing to the city’s transformation, he has also amassed a personal property portfolio in Manchester of around £23 million.

Stephen Beech knows how to profit from property. I’m here to look at an exciting new opportunity, which offers qualifying small investors a way to get involved with his latest Manchester projects, by a very interesting form of secured Crowd Funding. This gives investors the chance to enjoy great returns from both income and capital appreciation and let Stephen’s team of experts do all the hard work.

Tomorrow I’ll also be looking at the most recent project and grilling the team as part of our ongoing project due diligence. Got to dash: I’m just arriving in Manchester right now. I’ll post again tomorrow on the train home and let you know how it went and the latest news.

Meanwhile, take a look at the project by clicking below.