There was a time, ten years ago and more, when landlords built portfolios of buy-to-let residential properties and made a lot of money from them. It wasn’t just for the ‘rich and famous’; for many it was alternative planning for later life to traditional pension policies.

In those heady days, everything was in the landlords’ favour. They had access to easy money on an interest-only basis with rates ‘on the floor’. All of the tax rules were in their favour too. As long as you could get ‘on the ladder’, it was hard to go wrong. A few unlucky ones did, of course, but they were in the minority.

There were generous allowances to reduce your capital gains tax

Income tax rules were favourable. All of your interest was deductible against your rental income and you were allowed to reduce your rents by 10% as an allowance against ‘wear and tear’. When it came time to sell the rental property, there were generous allowances to reduce your capital gains tax, especially if you previously lived in the property.

But a few years ago, the government decided that landlords were getting too good a deal and introduced legislation that hurt a lot. First out was the wear and tear allowance, swiftly followed by higher rate tax relief on your mortgage interest. All of a sudden, landlords started earning lower net returns from their portfolio and began looking for alternatives, including corporate ownership of the properties.

The government wasn’t finished there. Stamp duty land tax, payable when you buy a property, carried a 3% premium if the property wasn’t your own home and an 8% premium was added to your capital gains tax rate when you sold it.

No longer the nice little earner it used to be

Now it’s not HMRC that brings the latest threat to landords’ profits. Rising interest rates reduce the returns in some cases to next to nothing. They still have the value of the property toward their retirement kitty, but it’s no longer the nice little earner it used to be.