Authored by
Michael Hawwthorne
Mike has more than 20 years of experience in advising clients in a range of financial matters. He likes to make the complex as simple as possible by cutting through industry jargon to talk in a language that we all understand.
Almost one-third of landlords (31%) are planning to reduce the number of properties they rent out, according to a 2024 survey by the National Residential Landlords Association (NRLA). That compares with just 9% who plan to grow their rental portfolios in the coming years.
With so many property investors looking to sell up and invest their money elsewhere, Chartered Financial Planner Michael Hawthorne, from Amber River True Bearing, takes a closer look at the challenges they face and the need for greater portfolio diversification.
Why are landlords selling up?
Recent tax changes have added to the costs of doing business as a landlord.
Capital Gains Tax (CGT) exemption has reduced significantly in recent years, falling from £12,300 in 2022/23 to just £3,000 in 2024/25. The tax charge for gains above this level is 18% or 28%, depending on the amount of income and capital gains you have.
Meanwhile, the tax-free dividend allowance also fell over the same period—from £2,000 to £500.
This, combined with the wider economic and cost-of-living crisis, has increased financial pressures on many of my landlord clients.
As an example, I have two clients who have both had tenants who stopped paying their rent, resulting in legal action to evict them. This process costs time and money. Not only were legal costs incurred, but because both cases lasted more than six months, they lost out on a large amount of rental income.
31% of landlords are planning to reduce the number of properties they rent out
How can a landlord diversify their portfolio?
Landlords often enter the industry because they are looking for a long-term investment with a good rate of return. Central to any good investment strategy is diversification—not putting all of your eggs in one basket.
I generally advise my clients to diversify their investments to include equities (the driver of returns for many years), cash (to provide short-term security/rainy day money) and potentially bonds (to soften the lumps and bumps of investing).
Any investment carries risk – its value can go down as well as up, and you may not get back the full amount you invest. But by incorporating a mix of investment methods, you are more likely to benefit from areas in the market that are doing well when others aren’t. I often use the analogy of the ice cream vendor that also sells umbrellas – particularly useful for the British summertime!
This diversified approach means your portfolio will also experience fewer extreme highs and lows than it would in a singular form of investment.
Creating a varied investment portfolio can be challenging and time-consuming as it must consider your attitude to risk, personal circumstances and financial objectives. A diversified portfolio could invest in thousands of different companies which requires a very careful balance.
An independent financial planner is often best placed to manage all these things for you due to their complex and ever-changing nature. Working with them to create a tailored financial plan will ensure you’re your goals and circumstances are reflected in your approach, and provide a clearer path on how to get there.
Is being a landlord still a viable income proposition?
Property has been a good investment for many people in recent years, providing a reliable long-term investment. Rental incomes are at an all-time high, and property in the UK has been very resilient to many of the changes and costs imposed on landlords.
However, there are also a variety of drawbacks to investing in property. It’s hard to get your money back out of them quickly; there are often high buying and selling costs, and they provide limited tax planning opportunities – not to mention the responsibilities and costs you will take on as a landlord.
Personally, I believe there are other solutions that can generate similar returns in a way that is less time-consuming, more tax-efficient, and less financially demanding. With diversification front and centre, you may even find yourself sleeping a little more soundly at night.
Get in touch
To arrange a meeting with Michael or one of his team, or to set an initial appointment with an Amber River financial planner in your area, call us on 0800 915 0000, or alternatively use our contact form here.
Disclaimer:
The information within this article was correct at the time of publishing, but laws and tax rules are subject to change. Your circumstances and where you live in the UK also have an impact on tax treatment.
