To boil it down, consider your offsets against tax (such as interest, accountancy charges and even cleaning costs), and pay special attention to how your income is affected by new properties:
When calculating your rental income and tax liability, check your rental income won’t topple you over into a higher income tax bracket. If you earn more than £100,000, Kate Faulkner, director of Designs on Property, suggests it may be worth not renting out the property at all and just letting the capital grow.
It is also important to carefully consider your loan-to-value percentages (how much you borrow against the value of the house). The interest you pay can affect your tax liability, so it is worth looking at different deposit amounts when you first take out the mortgage.
It can be confusing, and it is not surprising that a lot of landlords feel uninformed by the mix of different taxes that come to play on buy to let mortgages – the article quotes a recent survey in which almost 8 out of 10 landlords feel the confusion. Buy to let mortgages can be valuable investments, and can be tax efficient, but they take some planning.
Here at Limetree, we certainly agree: “So the moral of the story: get out of the dark and seek professional advice.”
We’re happy to help, and you can give us a call any time to discuss your own buy to let plans.