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Buy to Let – Is it still a good investment in Central London? Greater London Properties advise..

Changes to tax laws mean that many landlords have seen a hit to their profits, so it’s worth considering if buying to let in London is still a good business model or whether it might be time to move on to something else.

How Buy to Let Has Changed

In recent years, property price growth has slowed – especially in London, where Brexit and the COVID19 pandemic both meant that the housing market took a double hit. As a result, buying to let has become riskier compared to in the past. Along with this, the government has clamped down more heavily on buy to let recently, with changes to the tax system.
A three percent surcharge was added to stamp duty on additional properties in 2016, including buy to let properties and second homes. And, since 2017, mortgage relief has also been steadily decreasing. Before then, the previous scheme allowed landlords to deduct any interest paid on their mortgage before paying tax, giving higher-rate taxpayers a forty percent relief on their mortgage payments. Now, however, landlords are given a flat-rate tax credit based on twenty percent of mortgage interest.
While this will not impact you as a landlord if you are a basic-rate taxpayer, you may be affected if you are a higher or top-rate taxpayer. Along with this, landlords in London now have to consider that they must declare the income used to pay their mortgage on their tax return, unlike under the old system where rental income could first have mortgage payments deducted before declaring. For some landlords, this could mean being pushed up from the basic rate to the higher rate, resulting in a bigger tax bill.

Changes to Buy to Let Profits

As mortgage interest relief is no longer an option, many landlords, especially those who are higher rate taxpayers, have seen reductions in their profits. Tax relief has essentially been cut in half since landlords are no longer able to receive the full forty percent tax relief on mortgage payments. This can be especially challenging for landlords in London who have interest-only mortgages and are paying higher tax rates.

Is Buy to Let Still Worth Considering?

Despite the changes to buy to let in recent years, the answer to whether or not it is still a worthwhile investment will go beyond tax alone. You should take into consideration the type of investment that you want, and the main goal of your investment. Before deciding if buying to let in London is the right option for you, consider these pros and cons:


• You will earn rental income, although this might be less compared to in previous years. The rental market in London is beginning to gain traction once again as professionals return to work in the city after the COVID19 pandemic, which is good news for buy to let landlords.
• As the value of your buy to let London property increases, you could generate capital growth. This is especially true in London where house prices have been steadily rising for many years.
• Insurance is available to cover you in the event of loss of rental income, legal costs, and any damage to the property.


• Buying to let now means that your tax bill is going to be higher compared to in the past, which could reduce your profits.
• You will need to have the right insurance in place to make sure that you can still generate an income if there is nobody living in the property.
• You will need to consider additional costs such as stamp duty, property wear and tear, and landlord insurance.
• Being a landlord and managing a buy to let property is a big responsibility, ensure you have a good local estate agent such a Greater London Properties who can help and support you.

How to Get Started With Buy to Let London Property

No matter which area of London you are looking to buy, the process will usually involve these five basic steps:
1. Get your finances in order. It is a good idea to consult with a financial advisor. They will be able to help you determine how much money you should invest and the type of returns you can expect. A mortgage broker can help you find the best mortgage in principle offer so that you are ready to start making offers once you find a property that is suitable.
2. Find a property and make an offer. In general, it’s usually quicker compared to buying a personal home, especially if the property is already empty or is rented currently. However, don’t count on this. Ideally, you should allow at least a few months for the process to be completed.
3. Get the right insurance. You will need to get buildings insurance for the property at the very least. Although it’s not legally required, you should consider taking out landlord insurance to cover you in the event of any legal costs, injuries to tenants, or loss of rent.
4. Find Tenants: You can do this yourself or go through an agency. You should also decide whether you are renting out the property as a whole or renting it as an HMO. In London, HMOs are a popular choice among buy to let landlords since it’s easier to find tenants for one room rather than an entire property, as they are popular with young professionals. If you plan to rent the property out through an HMO, you will first need to apply for a licence from the council. Whether you rent out the entire property or room by room, be sure to draw up a legally binding tenancy agreement between you and each tenant. Our Lettings Team at Greater London Properties can do all this on your behalf.
5. Review and revisit. Buying a property to let in London can be a very hands-on investment. Speak with our GLP Property Management team as soon as possible and we can advise and support you as much or as little as you wish. For example, property maintenance, collecting rent and finding tenants on your behalf. You should also keep on top of reviewing your mortgage when your current deal expires. Many of our landlords find that it is useful to work with an accountant who can help them make sure that their buy to let income is handled as efficiently as possible, we work closely with First Financial and would happily provide you with their details.
Rob Hill Director of Greater London Properties;
“With all the chances to buy to let and uncertainty in the property market over the past few years, it’s no surprise that many would-be landlords are wondering if buy to let property in London is still worth it. It all depends on your investment goals and how much profit you can reasonably make. Luckily for our buy to let landlords, Central London is still a fantastic rental hotspot”.
Feel free to call us on 0207 734 4062 to chat about any of the above. We are here to offer advice and support throughout the whole process whether it be Buying, Selling, Renting or managing your property.
If you would like to find out more about Greater London Properties, head to our about us page.
Warm Regards
Rob Hill, Director

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