Buy to Let – mortgage-free property worth much more than originally paid.
A Buy to Let property is a property that has been purchased with the specific purpose of being rented out in order to provide a return on investment. The advantage of a buy-to let property is that- as well as bringing in an income that should cover the expenses of letting the property, often including the mortgage costs- the property should also increase in capital value, thus you end up with a mortgage-free property worth much more than originally paid.
There is an entire industry built around buy to let properties, including agents to manage the letting of the property, service companies to maintain the properties, and dedicated buy to let mortgages; as only the mortgage interest receives tax relief (not capital repayments), many buy to let properties have interest-only mortgages.
Those with a buy to let property will generally have to submit a self-assessment tax return (SATR) each year, with the income and allowable costs set out, and pay any income tax due on the rental profits.
One of the difficulties facing the owner of a buy to let property is determining whether expenditure is capital (giving lasting benefit) or revenue (including annual costs) in nature, as an income tax deduction is only given for the latter. Capital expenditure reduces the capital gain arising on the eventual disposal of the property, if it is still reflected in the value of the property at that time.
Furthermore, there are limits on the relief that you can claim for mortgage interest which need to be considered.
Tax Innovations can advise you on the tax implications of all aspects of owning buy to let properties including funding, ownership and disposal strategies, as well as assisting with reporting the income on your self-assessment tax return.
If you would like more information regarding buy to let issues, please contact Tax Innovations on 01962 856 990 or customerservice@taxinnovations.com.
Please call us on 01962 856 990 or visit our contact page.