Due to the ongoing changes in UK tax laws and the way landlords are now taxed, many landlords may well be asking themselves whether owning a Buy-to-Let property is still worth it.

The introduction of section 24 to the Finance Act in April 2017 meant that landlords would no longer be able to claim mortgage relief on BTL properties, affecting landlords across the UK. As a result, over the years many BTL owners have started to see a steady decrease in profits, with the full effect being seen in the 2020/2021 tax year. The changes mean some landlords have also been pushed into a higher tax bracket than under the previous tax system as on paper, profits from rentals are higher.

Whether or not to invest in BTL really depends on what type of property portfolio you have and what you want to achieve with your investments. If you own a single property with one household renting it from you, it may be that your profits are very small in comparison to the risk and at the end of the tax year you’ll have a hefty tax bill to pay. If that’s you, it could be worth selling the property to release any profits and look for new investment opportunities elsewhere.

HMOs are a slightly different story, as collecting multiple rents in a house with, say five renters, means it’s probably still worth you investing time and resources in BTL. If you’re new to investing in BTL properties, look for an area where you can get higher rental yields rather than the more saturated markets where profits are lower.

As Section 24 only applies to individual landlords, there is an option to set up as a limited company landlord. However, if you were to transfer your existing properties into a limited company, this would count as a sale. That means you’d have to pay stamp duty on the sale, which could end up costing you more than you’d lose through the reduction of mortgage interest relief.

You could also consider renting out your BTL property as serviced accommodation (SA). Properties of this type don’t fall into the same tax bracket so it could be time to change yourbusiness model. Furnished holiday lets (FHL) are also specifically excluded from the Section 24 provisions. So simply changing your BTL model to either of the above could bring you much higher cash-flow and more attractive tax breaks.

As the tax changes start to really hit landlords from this year there may well be a flood of properties put on the market as many ‘accidental’ landlords may no longer see the benefit in owning properties of this type. If you’re a would-be property investor this could be a great opportunity to snap up a new property and get on the BTL ladder. Always make sure you carry out due diligence when investing in any new property.

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