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Full podcast episode transcript
0:09 Susannah Streeter: Hello and welcome to Switch Your Money On from Hargreaves Lansdown with me, Susanna Streeter, Head of Money and Markets.
0:14 Sarah Coles: And me, Sarah Coles, Head of Personal Finance.
0:17 Susannah Streeter: You can't have missed the rumour mill cranking up again about what new taxes could be pulled out of the bag by Rachel Reeves at the budget in the autumn, with increasing speculation that more property could be in line for higher taxes in some form. But it is speculation. We'll be talking about this a little bit more in the podcast.
0:35 Sarah Coles: Yes, I mean, the rumour mill is constant at this time of year, but yes, definitely we're seeing property in the frame. There's also been some really interesting new data. So it's actually looking at rental properties coming to the market and discovered it's at its slowest pace in five years. So a lot of people might think about property as part of their investing picture, including for retirement. So this move away from it is quite notable. And it's also, as you mentioned, the rumours around the budget, it might be raising questions among people who might have been considering investing in property and having a think about what that might mean for them.
1:05 Susannah Streeter: So we thought it was very timely, didn't we, Sarah, to explore this question of what works best for retirement. A property or a pension, and who better to help us along the way is Helen Morrissey, Head of Retirement Analysis, who's gonna help us weigh up the two. Welcome, Helen.
1:22 Helen Morrissey: Thanks, Susannah. I mean, as you say, my property is my pension. It's a pretty common refrain, but we're gonna talk through why the perception might be different from the reality.
1:32 Susannah Streeter: So Sarah, there have been some really interesting figures coming through, haven't there, about the number of rental properties coming onto the market?
1:40 Sarah Coles: Yes, so the rental market is always an interesting one to look at, but what's really noticeable now is that aside from the pandemic slowdown, the pace of rental property’s coming to the market it hasn't actually been this slow for more than 25 years. So there's a whole bunch of different things going on here. So some of it will be that people are coming to the end of a fixed rate mortgage and they might be facing more expensive deals if they're sort of remortgaging onto a higher rate so in some cases for them, the maths just doesn't really stack up anymore. But for other people, the issue is tax, and this is where we get into the exciting world of tax.
So if I start with sort of where we are at the moment. Taxes have got much more onerous on property investors. There's something called a stamp duty surcharge, which is additional stamp duty on top of stamp duty that you pay if you're an investor in property. The stamp duty surcharge was introduced in 2016, and it was actually increased last October to 5%. So at the same time, you've got to think about tax on the rental income. So the freeze on income tax thresholds will automatically mean more people paying higher rates of income tax on rent. Then there were more changes around mortgage interest. So basically before you could use mortgage interest as an allowable expense before tax was due. Now you get a 20% tax credit instead. So there's a real change, particularly for higher rate taxpayers and that came in 2020, 2021. So for a lot of people who are kind of doing a buy-to-let, that would have made a huge difference as well.
3:02 Susannah Streeter: And what about the capital gains tax allowance, Sarah? I mean, that's fallen, hasn't it and that will have an impact as well, certainly, and may have led to these figures that we're seeing.
3:13 Sarah Coles: One of the big issues about investing in property is, you know, you pay tax on the way in, you pay tax as you go along, and then you pay tax when you sell. So the capital gains tax allowance dropping from, if you remember back in 2022, it was actually £12,300. Now it's £3,000. So that big change means that for those who've made a gain on an investment property, there is more tax when you sell. And of course, unlike stocks and shares, you can't just protect it with an ISA and it's very hard to realise bits of your gain as you go along. So you're very likely to be sort of hit in the face with that at the end.
3:42 Susannah Streeter: And then we've got as well evidence that some people sold up ahead of the budget last year, partly because they were worried there could be higher rates of capital gains tax on residential property. It didn't happen, but the stamp duty surcharge rose and the changes did convince some landlords that tax position wasn't going to get any more generous which could have fed into some sales leaving rental properties thinner on the ground and now of course we've got this fresh round of speculation about what could be in the budget.
4:08 Sarah Coles: Yes, so there's been a rumour that the government could be considering making landlords pay National Insurance as well as income tax on their rental income. Now obviously at the moment National Insurance is just paid on earned income if you're under state pension age so extending that to rental income would make a really big difference for landlords. Now the other rumours in the budget, they could affect property more generally. So they're not specifically focusing in on landlords, but it is worth exploring them.
4:32 Susannah Streeter: So one of the rumours is that there might be a change to capital gains tax on the home that you live in. So at the moment, if you sell up the home you live in, you don't pay capital gains tax. One of the rumours is that that exemption might change for more expensive homes. So it might be that people could have to pay tax on some of the rise in the house price. Obviously, it's worth saying totally just a rumour. All of these things that I'm running through now they are completely speculation so it's really, really important to bear that in mind when we go through them and you know not to worry too much about all the things people are talking about at the moment.
5:05 Sarah Coles: Because as we've seen before there's been speculation and then it's not actually come to much at all. It's almost like these ideas sometimes are thrown out to be discussed.
5:12 Susannah Streeter: Oh exactly I mean one of the things they say is you know the Treasury is talking about you know somebody could wander into the Treasury and say let's tax, I don't know, jam jars or something and then they could technically say that that's being thrown around so it is really worth bearing all of that in mind at this particular period ahead of a budget. One of the things it said to be looking at again is this idea of a sales tax on homes worth over a specific amount. Now the thought is that that might in some way replace stamp duty although again we don't know if that change would happen and if it did happen we don’t know that it would apply to investment property as well so clearly lots of things that nobody knows there. And then there's another sort of big debate about whether there's going to be some sort of change that is a replacement of some kind council tax over the longer term, whether that could possibly be based on the percentage of the property's value. Again, totally not clear. And also it's really, we don't know whether that would affect maybe tenants or landlords. So probably throwing the cat among the pigeons, but really definitely bear in mind, we're firmly in the realms of speculation here. So nothing might happen. And really, you know, always is the case with these things if people are talking about tax on your home, or even if people are debating about house prices this is where you live. I mean, obviously it's different for investments, but really, if you're thinking about what on earth is gonna happen to tax on where I live, the most important thing is the fact that you're living there. So if you’re thinking of buying a house, it totally suits your needs, you can comfortably afford it and you've thought about what will happen maybe if you have changes in outgoings, there is no reason why this speculation should change your mind. Obviously, you know, if you’re investing in property you will always need to kind of keep an eye on when the maths changes, but it's really important kind of not to get carried away with the speculation.
6:46 Sarah Coles: As you say, there's gonna be lots more cats thrown in between lots more pigeons, I think, in the weeks and months to come as well. So we do have to bear in mind that this is currently, at the moment, still speculation. Nevertheless, it is still worth weighing all of this up against investing in a pension. Helen, what's your take on this?
7:04 Helen Morrissey: As a country we certainly do love our property but to be fair we also need to be loving our pensions because pensions have significant advantages. So first of all you've got the tax relief on contributions so that means that a basic rate taxpayer paying £100 into their pension it only costs them £80. For a higher rate taxpayer that £100 contribution would only cost them 60 so that's a real significant incentive towards saving into a pension.
On top of that, if you are in a workplace pension, you get an employer contribution you know on top of your own, so that can make a huge impact as well. And then you've got the tax-free growth on the investments within the wrapper. And then, you've also got the ability to take tax-free cash when you do come to take that pension income. So there are many, many plus points to saving into a pension.
7:56 Sarah Coles: I suppose there's also all the practicalities as well of owning a property that you're renting out. You might be able to employ an agency to help you out, but of course that will cut in to what you can take home in terms of earnings from that property. But there's all the faff, if you are managing it yourself with tax going wrong, the boiler packing up, and just the whole admin of it really.
8:20 Susannah Streeter: Yes it is worth adding as well that when landlords are sort of talking about reasons why they're leaving this world, one of the issues is around some of the legislation changes. So there's been some reform which is brilliant news for people who are renting because it really secures a lot of their rights so things like no fault evictions are set to be outlawed, tenants gonna have the power to challenge unreasonable rent increases and there could also be an end to sort of rent bidding which is pushing rents up. All of these big step forwards for people who are renting property. There are a lot of landlords who think this could actually make running a property, you know, take more time, could be more expensive, and so for them they've decided that maybe that's one reason why they should get out. But Helen, I guess one of the issues is if you're going to think about being a landlord in retirement, you're not really retired are you? It's kind of actually a job.
9:04 Helen Morrissey: Absolutely, I mean, I think people you know may find the idea of renting out property in retirement appealing, but there's so many things that you need to consider. And as you say, it can become very much like a job. So you know first things first, you know managing tenants in and of itself can be quite tricky. What happens if you have problem tenants? You may need to spend a lot of time sorting out repairs, redecorating, etc and all of this could have an impact, not just on your pocket, but on your lifestyle as well. And obviously you could hire an agent to manage the property, but you'd need to consider the fees there, as well as those other costs, the maintenance can really add up. And you'd also need to factor in how to pay the mortgage during times when you don't have tenants.
9:48 Sarah Coles: So yes, there's so much to think about, Helen, isn't there? And there's also the question of residential property as an asset class.
9:55 Susannah Streeter: Yeah, so if you sort of narrow it down to kind of investing themes, if you think the big rule about investment is to make sure that you diversify, so you're spreading your risk among a number of different assets and a number different kind of investments. But of course, if you're investing in property, they're really, really expensive so often people just can't diversify easily. They might just have one property and of course that's the same asset class as the other major asset you own, your own home. So it's not just a case of having all your eggs in one basket, you've basically got two ostrich eggs in the same basket.
You also have to bear in mind there's no guarantee that prices will rise. So obviously people have got used to prices rising, but you absolutely can't guarantee it and there will definitely be times when property doesn't perform. So if you actually look recent performance, obviously, you know, anything is only ever gonna be a snapshot but just for example, over the year to July, property prices were actually up just 2.4% which means they haven't been keeping pace with inflation. And of course, you're not just buying a sort of nebulous into property, you are buying a very specific property and a whole host of specific and kind of unknowable risks like sentiment in the area or future development nearby further down the line. So there's a bunch of risks that you are taking if you're looking at property as investment.
11:07 Helen Morrissey: Yeah, and you do, you know, really need to be aware of the fact that it is so expensive to buy and sell properties. You know, you've got stamp duty, legal fees, etc and also that it can take a lot of time. You know you can't just assume that you're gonna get a quick sale, particularly with the market being the way it is. And you know, if you are, you know, really relying on property for your retirement, you know what happens if you are struggling to sell or property prices are depressed it can throw a real curve ball into your retirement planning.
11:37 Sarah Coles: And of course investing in a property, it has been a sort of quite common approach for self-employed people when they're thinking about investing for the future.
11:44 Helen Morrissey: Yes so investing in property has been a popular way for the self-employed to save for retirement. However, there are various reasons why it may not be the best option. So I think the issue is with a lot of self-employed people and pensions is that they may not want to tie up their money in a pension until it's currently the age of 55, it's rising to 57 in 2028. And the reason for this is that they could be concerned that they might face issues during their working life that means that they need to access that money and with a pension, you can't access it until you're at least the age of 55. If you try to you know, it's subject to a really punishing tax rate. However there is another option for the self-employed and that is the lifetime ISA. This benefits from a 25% government bonus so you can contribute up to £4,000 per year to a lifetime ISA and the government will top that up and that, you know, in that case it would top you up to £5,000 so it's a really, really good benefit. There is also the ability to access that money if you really need to, though this is subject to an exit penalty that not only removes the effect of that government bonus, but also a chunk of your savings as well. So you need to be aware of that. It's also worth saying that access without penalty other than to buy your first home is only available from age 60. So obviously that is later than the earliest date for pensions.
13:13 Sarah Coles: Of course, one of the things that we have been saying about the lifetime ISA is that it's not perfect and it does need some reform.
13:18 Helen Morrissey: You're right, it absolutely does, Sarah. So as I say, that exit penalty, as it currently stands, removes the bonus from the government plus a chunk of that saving. And we have argued that that needs to be reduced from 25% to 20% in a bid to mitigate that. It's also worth saying that we need to enable people over the age of 40 to be able to open a lifetime ISA. At the moment, you can't open one after the age of 39 although if you do have one open, you can pay into it until the age of 50.
Another benefit of the lifetime ISA is that income taken from it is tax-free. This compares to a pension for which 25% is usually tax-free and the rest would be taxed as income. However, if you do pay tax at a higher rate, then pensions will be better value due to the tax relief available. Plus, of course, we've got the limit there on how much you can put into a lifetime ISA. It is considerably lower than a pension at £4,000 per year so in many cases, it works well alongside a pension for your retirement.
14:23 Sarah Coles: So it's safe to say it's not the most straightforward of products, but it's got some real advantages for those people that it really suits.
14:29 Susannah Streeter: So we've talked quite a lot about buy to let, but it’s not the only way that people talk about property as part of their plans for retirement. So one of the things I wanted to mention was downsizing, because some people will also be considering downsizing as part their plans. So can you take us through some of the considerations here?
14:46 Helen Morrissey: Yes, so we actually do research on this as well. So people tend to believe that downsizing is the answer to filling any gaps in their pension planning. However, a survey that we've done with Opinium shows that only 29% of people are up for releasing money through downsizing. And what we tend to find is that when people are younger, they're more likely to say that they would consider downsizing but they become less keen as they get older. So only 17% of over 55s said that they would think about it compared to 37% of those aged between 18 and 34. The biggest reason to not do it is that people become very attached to their home. You know it's a place where they've brought up their family, they've got friends you know nearby, they don't really want to move. Whereas others also believe that it is too expensive. So anyone considering downsizing to fund retirement, will have had an eye on the budget rumours that there could be a tax on sales for more expensive homes so that's an issue there. There's also a risk that those trading down might be in a hurry to part with a property that they're concerned could become a tax liability. Any imbalance of demand and supply in what is already a buyer's market could depress the price of more expensive properties so that downsizers have to cut their selling price and that could blow a hole in their retirement planning.
16:06 Susannah Streeter: It's definitely something that we talk about whenever we get all this speculation that there is a concern that people kind of rush to make changes or change what they were planning to do because they're worried about tax and of course if these things never happen then they've rushed and sometimes wasted money for no reason so it's gonna be an ongoing theme isn't it?
16:23 Helen Morrissey: Absolutely.
16:24 Susannah Streeter: And what you're saying Helen is true and it means that people could be forced into making a knee-jerk decision, reacting in a really rapid way which for the longer term won't be any good or potentially no good for their longer term stability. They could be forced into making a quick decision and then actually find that all of this speculation comes to nothing. We have seen this pattern emerge in the past. Often, the best solution is actually to do nothing, to wait until the dust settles and we have greater clarity on the tax framework going ahead. We just have to see. But really useful, nonetheless.
17:02 Sarah Coles: Yes, we're gonna have to keep one eye on the future and one eye on all the rumour that's happening at the moment. So I think lots of focus in lots of directions. So we've come to that brilliant time of the week where we get to do the stat of the week and this time I've had a go. So I've actually looked at the Royal Institute of Chartered Surveyors residential market report. Every month they look at kind of how the market's doing. So it wasn't a brilliant month for them this month and they publish a load of quotes from estate agents around the country. So I’ve pulled out a few of them, but one of them isn't a genuine quote. So the options are we might as well give up and close until next month, about halfway through the month the activity fell off a cliff, the economic black cloud is approaching and it doesn't bode well for homeowner equity, or funny market at the moment. So what do you think Susannah?
17:46 Susannah Streeter: I just think the economic black cloud is approaching and it doesn’t bode well for homeowner equity, that doesn't sound like it's tripped off the tongue of a survey. It sounds like something that AI has come up with. I think it must be that one.
17:58 Sarah Coles: And what do you think, Helen?
17:59 Helen Morrissey: So I really like Susannah’s thinking there about the role of AI in that quote, but I have a slightly different point of view. I think it's the first one. I think it’s we might as well give up and close until next month.
18:09 Sarah Coles: Helen, you're absolutely right. Yes, apparently no estate agent would ever say they're gonna give up and close until next month ‘cause they never know when they might get small commission. But yes, the other stuff is all true. Maybe perhaps one estate agent got AI to write it. Maybe they've been sort of multitasking.
18:24 Helen Morrissey: [laugh] Maybe.
18:26 Susannah Streeter: It does seem though it has been weird. Do you think it's the weather that's really caused, in August, this real drop-off in activity? Maybe people are just, you know, thinking I'm just gonna head away, get away from it all or perhaps they're browsing Rightmove from the safety of their sun loungers.
18:43 Sarah Coles: Yeah maybe all the viewings are on those properties that have got a bit of air conditioning.
18:47 Susannah Streeter: [laugh] It is a funny market at the moment.
18:49 Sarah Coles: Before we go we should say this was recorded on the 22nd and 28th of August 2025 and all information was correct at the time of recording. Nothing in this podcast is personal advice. You should seek advice if you're not sure what's right for you.
19:01 Susannah Streeter: And the government does offer a free impartial service Pension Wise to help you understand your retirement options.
19:07 Sarah Coles: Investment rise and fall in value so you could get back less than invested, investment income varies and isn't guaranteed, and pension, ISA and tax rules can change, and benefits will depend on personal circumstances.
19:17 Susannah Streeter: We referred to a survey. It was of 1,581 people conducted by Opinium on behalf of Hargreaves Lansdown in September 2024.
19:25 Sarah Coles: So all that's left is for us to thank Helen Morrissey for being here and our producer Elizabeth Hodson.
19:30 Susannah Streeter: Thank you very much for listening. We'll be back again soon. Goodbye.
19:33 Helen Morrissey: Goodbye.
19:34 Sarah Coles: Goodbye