If you plan to invest in a buy-to-let property in London, the best place to do so might be in Holloway based on its annual rental growth as of February.
An analysis showed that average asking rents for a two-bedroom unit in the district rose by 22 percent to £2,126 year over year. While Holloway seems like a good place to start a buy-to-let venture, you should still consider other places and be informed by asking expert advice. For instance, real estate agents in Canary Wharf, London can help you with finding the right property especially if it’s a long-term investment.
Rental Hot Spots
In terms of monetary value, Camden’s average rental rate for a two-bedroom unit cost £3,079 in February. This represented an almost 16 percent increase from the previous year. Southwark ranked behind with a 20.2 percent average rental growth to £2,855, while median rents in Kennington rose 14.3 percent to £2,356.
The average rents in these places cost more than the median rate of £2,093 in London. But if you’re more particular about where renters have looked for properties, the Southeast of London has been their target destinations particularly Kennington.
However, landlords should focus more on rental yield to make a profit from their investment, instead of relying on capital growth. New tax rules for this year could make it more challenging to achieve this, so finding the right location is more important than ever.
New Tax Regulations
Landlords might no longer be eligible for tax relief on their mortgage interest payments beginning in 2020 tax calendar. Those with current payments for this year could only offset 25 percent against their taxes for the 2019-2020 tax year if you only file income taxes as an individual. An increasing number of landlords have adapted with the new rule by establishing a limited company, which serves as property’ owner.
Another updated tax policy involves a higher annual personal allowance to £12,500 for individual ratepayers. In other words, you won’t have to pay income taxes when you earn not more than this amount. The higher tax rate of 40 percent will also apply to a more substantial income threshold from £46,350 to £50,000, while those who earn £150,000 will still pay 45 percent.
The Capital Gains Tax for this year also increases to £12,000 from £11,700. This will be useful in case you decide to sell a property since it means a bigger non-taxable income, although take note that it’s better to try putting the property title into a limited company. The corporate tax rate for this is just 19 percent, which is significantly lower than the 28 percent rate for higher and additional-rate taxpayers.
The landscape for investing in rental properties has become more difficult this year, but that doesn’t mean that investors should choose an alternative. You should consult a property consultancy firm with extensive knowledge of different districts in London before you decide on whether or not it’s an excellent choice to dabble in a buy-to-let investment.