Buy To Let Finance UK
Buy to Let Finance UK | Taxing Questions for Landlords
When it comes to buy to let finance UK landlords need plenty of advice, especially if they are new to property investment. In order to get the best return on buy to let finance UK property investors need to be aware of the different taxes that they might have to pay at various stages of the life of their property investment. Here are some of the areas that affect buy to let finance UK investment.
Our understanding of buy to let tax issues are as follows: (and of course we would recommend that you check this out with a tax expert...) When it comes to buy to let finance UK landlords have to pay tax on the income they receive from a rented property. This is usually assessed at the highest rate that landlords pay. This means that a landlord who is a higher rate tax payer, will be assessed on his net income at the 40 per cent tax rate.
However, with buy to let finance UK tax advisers state that there is more to the calculation than just a straight tax assessment. With buy to let finance UK landlords may make a number of deductions that affect the income on which they may be taxed. To start with, a buy to let finance UK mortgage may have an arrangement fee, which is tax deductible, as are all the costs of arranging the mortgage.
Interest Only BTL Mortgages
With buy to let financing UK landlords often choose to go for interest only mortgages rather than the capital repayment version. Not only does this keep more of their capital liquid, but it also reduces their tax bill. Unlike residential mortgages, there is still tax relief on the interest paid on buy to let mortgages. However, no such relief exists for capital repayments.
Once they have arranged buy to let finance UK property owners often need to refurbish or renovate the property, and this is not tax deductible. However, maintenance and repairs can be deducted from the tax that is due. Other allowable expenses relate to the business of letting the property, so after arranging buy to let finance UK investors can deduct letting agents' fees, advertising costs and the provision of services such as utilities to tenants. The cost of insuring the property is also tax deductible.
Landlords cannot claim on costs incurred while the property is vacant, but once it is occupied there are options for claiming tax on the landlord's belongings that are in the home. With the property in use, there will be wear and tear on carpets and the like and landlords have two options for this. Either they can deduct the cost of replacing worn items against tax or they can claim an annual wear and tear allowance of 10 per cent of the rental.
Finally, buy to let finance UK investors will be concerned about what happens when they come to sell the property. The costs of purchase and sale are not tax deductible and there is capital gains tax to be paid on any sale. Roughly speaking, this will be for the increase in value of the property during the time the landlord has owned it. However, there is an annual capital gains tax allowance that can be deducted from the amount eventually due. When taking out buy to let finance UK landlords must consider all these areas.
