We are fortunate to live and work in one of the UKs most beautiful locations. People want to live, work and holiday by our wonderful beaches.
Couple this with the recent property price boom, and it’s understandable why the buy-to-let market is as busy as it is; showing no sign of slowing.
BTL mortgages are used on properties which are being bought to rent out to a tenant. The owner of the property becomes the landlord. Most BTL mortgages are interest only, with the capital debt being payable at the end of the mortgage.
Owning a BTL might be the first time that you receive income that is not taxed at source. You will likely need to complete self-assessment tax returns every year. You can register for this through HMRC. You will need to keep records of income and expenditure. Some expenses will be deductible against income and/or CGT.
Income tax arises on the net rents each year, at 20% for basic rate taxpayers and 40% for higher rate taxpayers. CGT is only relevant if the BTL is sold for a profit. Main residence relief will not exempt the gain from tax as this is a property you will not have lived in. The annual exemption will reduce the taxable gain, but the profit on sale will be taxed at 18% and or 28%, again depending on your rate status for the tax year of that disposal.
Take advice on whether it’s best to hold your BTL in your own name, or in a company name which you own. There are tax advantages to using a company structure, but this will add a level of paperwork and annual compliance.
If you’re looking to purchase a BTL, please get in touch. We offer a free initial appointment for all new clients.
Jen Smith, Conveyancing Executive
01202 499255 | jsmith@frettens.co.uk
This article is featured in the January issue of the Dorset Business Focus magazine. Read on the online version here.