'Lack of tax awareness among landlords'

A lack of awareness means that some landlords may not be declaring earnings on buy-to-let properties, it has been claimed, even though they may not have to pay tax for the first few years anyway.

Tom Entwistle, editor of online community Landlordzone.co.uk, said that there were cases in which landlords with very small portfolios were not aware they had to declare any earnings made from letting property.

He warned that HM Revenue and Customs was having a "purge" on landlords who were not declaring income and said that the organisation's advertising campaign had not reached "the man on the street" and needed to be put in the national press.

Mr Entwistle said that when most people purchase buy-to-let property they usually don't pay any tax for a few years because of the expenses.

He commented: "Your expenses usually come to as much as your income anyway. You're lucky if you make any profit, for a few years anyway. So you won't be paying tax, even if you do declare."

A recent study from the Mortgage Trust showed that new buy-to-let investors were entering the sector for the long-term, with 75 per cent expecting to hold onto their property for more than five years and 26 per cent expecting to keep their first property investment for more than 15 years.

Landlord Mortgages comments “Most people are aware of their obligations in respect to declaring income, but this does not necessarily mean that they do accurately declare income figures.”

Landlords 'expect better gains from buy-to-let'

Around three-quarters of new landlords choose to invest in buy-to-let because they expect better returns than they would get through other forms of investment, according to new research.

Mortgage Trust said that on average, 63 per cent of a landlord's portfolio was made up of property rather than other investments.

The survey also found that 28 per cent of new landlords stated that their main reason for choosing buy-to-let was because they wanted control over their investment, something which the firm claims is offered in this area more than in some other types of investment.

Managing director of Mortgage Trust John Heron said that as every adviser would tell their client, the key to a good portfolio was remaining risk averse and that landlords were placing a heavier weighting on property due to confidence in buy-to-let returns.

He commented: "People have more faith in the value of bricks and mortar than ever before and in addition, short-term returns are on the up, with demographic factors fuelling tenant demand and rental incomes."

Paragon figures show that rents grew 6.9 per cent in the three months to February, while rents rose faster than house prices in February, pushing rental yields up to 6.1 per cent.

Landlord Mortgages comments “Most landlords are investing for the long term i.e. retirement. Buy To Let over the long term is likely to fair well against more traditional types of investments.”

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