A tax expert believes the government’s scrapping of the lifetime allowance for pension contributions could severely impact the buy to let sector.

Chancellor Jeremy Hunt ‘trumpeted’ his Budget as a 'budget for growth' with its key points concentrating on childcare helping to increase employment, business support and pensions.

The scrapping of the lifetime allowance cap now allows workers to increase their pension savings by as much as they can afford as well as the annual tax free allowance being increased by 50 per cent from £40,000 to £60,000.

A specialist tax ‘boutique’ dedicated to providing advice to property buyers on their various tax liabilities’ chairman David Hannah claims that prior to this budget many people decided to invest capital into BTL properties for their retirement.

With the lifetime allowance cap being abolished it now opens up far more options for pension investors and some are seeing the PRS less of a ‘force for good’ because of the punitive tax and regulations.

The chairman cites a study undertaken by an industry body that found 40 per cent of landlords are planning for their retirement age as they are 55 and over, half of these are reliant on this income as their pension nest egg.

Of course there are many benefits of investing in BTL properties for retirement purposes as a recent study found that 62.24 per cent of buy to let landlords are experiencing a record demand for their rental properties over the year, and 45 per cent are committed to purchasing more properties to rent out in the next twelve months.

Hannah says: “I think one of the best measures announced from the Budget is the scrapping of a lifetime cap on a pension fund which has been held at the same level for about 10 years.

“Now, we have the real prospect that people such as senior executives, entrepreneurs, and other high-earning individuals will have a no limits pot that they can put into, which is great, it will provide them with more flexibility and options for their pension.

"However, this could have a knock-on effect on the buy to let market … What we probably need is a liberalisation of the pension funds and investment rules.

“If all that money is going to flow into pension funds, it's got to be invested in someone. Why not liberalise how you can invest and allow you to invest in yourself or in private companies, because currently, you can't do that.

“This could also see a rise in investment in small businesses in the UK providing them with a platform to grow - such as those in the construction sector which could aid the undersupply of properties.

"The problem is going to be for pensioners who are already pensioners who don't have any earned income anymore, they can't take advantage of this - they will feel stuck with their current pension.