Buy-to-let has long been considered a strategic and profitable move onto the property ladder, but with changes to UK legislation, are we going to see the phenomenon die out or is it still possible to reduce the tax paid on rental income and turn a healthy profit from your buy-to-let property?

Tax relief has been phased in since 2017 and will be at a flat rate of 20% and fully in place by 2020. Landlords who only pay a basic tax rate will see no change, however high income landlords will be in a more vulnerable position to loose out more.

The Nationwide Building Society published estimated figures of how a typical landlord’s profits might be hit. Someone with a £150,000 buy-to-let mortgage on a property worth £200,000, with a monthly rent of £800, would currently have a net profit of around £2,160 a year. When the new legislation is in full effect, the net profit would plunge to £960.

So, what can a landlord do to ensure profits remain stable?

INCREASE RENT – It is possible to increase rent on your property to off set the tax relief loss. However by doing this you do run the risk of loosing tenants and thus having a vacant property.

SWITCH MORTGAGES – It could be possible to switch your mortgage, for example move from a 2.99% mortgage to a 2% mortgage. By switching to a cheaper mortgage you could boost the profit and off set any tax relief losses.

UTILISE YOUR SAVINGS – Some building societies offer a mortgage which utilises your savings to cut your bills. Essentially you will not be earning on your savings but utilise the money to shrink the amount of interest you pay on your mortgage. However when utilising these deals be savvy as many examples show that some mortgage rates commence at 2.99% for the first two years but then jumps up to 5.29%.

BECOME A LIMITED COMPANY – If you purchase a property through a limited company instead of your own name you will not be effected by the new legislation. Companies are charged 20% (falling to 17 percent in 2020) corporation tax instead of the 40% higher rate tax rate taxpayers are currently liable for. Administration fees do apply when setting up a company, however these are swiftly outweighed by the longer term profit opportunity.


Before considering cashing in and selling up your buy-to-let properties consider the long term ambition of your property. For example, if you strongly rely on a reliable rental income then it could be more beneficial to take one of the above measures and make the best of the new rules. However, if you bought your property cheaply and have the opportunity to make a healthy profit on its sale, now would be the time.

Most importantly is to seek advice from the professionals. Mount & Minster specialise in property portfolio management and are ready to advice you, contact us today on either Grantham: 01476 515329 or Lincoln: 01522 716204.