Tax Planning Opportunities and Issues Around Buy to let Properties.
There are many advantages to owning a buy-to let property. 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.
It can be used as a retirement savings plan: current income and capital is invested in a property that can eventually be sold to fund retirement. Although this will not receive the tax relief that a pension plan does, you can access your funds at any time if your circumstances change, instead of having to wait until retirement age.
Buy to Let Properties Tax Planning
There are tax planning opportunities and issues around buy to let properties, for example:
- If you also own a private property, you can choose to mortgage the buy to let property instead, as you receive tax relief on the buy to let mortgage and not on a private mortgage.
- You only receive Principle Private Residence (PPR) relief from capital gains tax (CGT) on one property at a time, but you get to nominate your PPR. If your rental property is likely to have a higher gain than your private property then it may be possible to get PPR relief on that property instead.
- You should also consider the impact of inheritance tax (IHT) on the property if it is passed in your Will. There may be ways of holding the property to minimise the IHT on your death.
These are just a few of the tax planning issues that Tax Innovations can help you with. Our dedicated team of experienced tax advisors are ready to advise you on the best way to purchase, own and dispose of buy to let properties, tailored to your own particular needs.