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Tax changes could create pension crisis for 1.8 million landlords

Monday 24 July 2017

Recent changes to the taxation of the BTL sector could create a new pension crisis as people dependent on rental property to fund their retirements are affected, says a leading landlord organisation.

Approximately 1.8 million people in the UK –  77 per cent of landlords – say they rely on their rental investment for their retirement, with 68 per cent saying it represents a good way to plan for retirement, a Mintel consumer market research report has shown. 

But the Office for National Statistics (ONS) estimates the average retired household spends £21,770 every year, leaving a shortfall of more than £15,000 after taking the full basic state pension of £6,359.60 into account, which would require savings of £300,000.

Richard Lambert, CEO at the National Landlords Association (NLA), said: “As a consequence of government policy over recent decades almost two million people are reliant on their property to fund their later years, but the changing tax regime will substantially reduce the income they receive from these investments and so compromise the retirement plans of a significant number of hard-working people.

“Around a quarter (27 per cent) of UK landlords are already retired, and 37 per cent are aged 55 or over, so there is a pressing need to tackle these issues without delay."

The NLA is calling on the Government to help those affected adjust their financial plans by tapering the amount of capital gains tax (CGT) landlords will need to pay when they come to sell their property, based on how long they have owned and let it out for.

He added: “Landlords who have invested in residential property for the long term are different from short-term speculators who buy and develop properties, and this should be recognised when it comes to how much capital gains tax they pay when they decide to sell.

“It is not always in the best interests for landlords to continue to manage residential property into later life. 

"A capital gains relief like we propose would provide an incentive to sell, allowing people to sell poorly performing properties and potentially purchase an annuity or invest in more liquid, lower risk assets to fund their retirement instead."

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