Don’t over tax yourself

It is this offsetting which can substantially reduce your tax liability – but often you will need to take advice on what can be offset and to keep careful records of maintenance you carry out – for example in areas such as painting and decorating.

You can also make deductions for depreciation of furniture value, offset cleaning charges and the cost of ground rent, service charges, buildings and cover for white goods, gas boilers and plumbing and advertising the property. Any letting agents’ and accountants’ fees may also be offset. Although this may all seem complicated, many find there are tax benefits in being a landlord. But remember, the benefits only apply to the interest and not to any repayment of the capital.

Capital gains tax is another issue to bear in mind. Because the property is not your main residence, when you come to sell the property, you will be liable for CGT, on any gain you have made. The rate you pay depends on your existing tax rate. You can deduct costs including the original purchase price, costs of disposal such as estate agents’ and lawyers’ fees and of any capital improvements made to the property. Once you have worked out your actual gain, you may then deduct indexation allowance for any periods of ownership up until 1998 and taper relief thereafter. Taper relief is extremely complicated but advice can be obtained from the Inland Revenue, who will provide a help sheet on how this operates.

There are ways around CGT. If you move into your buy-to-let property after the last tenant has moved out, you may claim it as your principal residence and, in doing so, the last three years' worth of gains become tax free. And, if the property was ever formerly your home, you are exempt from CGT if you sell within three years of it becoming a rental property.

Buy-to-let investing is a great way to gain access to the property market whilst diversifying your portfolio. In order to take full advantage of any tax benefits available, and to protect as much as possible from the tax man, it is worth fully investigating all the possibilities.

Call us if you are already a Buy-to-Let investor or you would like to be.

Steve Weisner
Independent Financial Adviser
Radcliffe & Newlands
5th Floor Crystal Gate
28-30 Worship Street
London
EC2A 2AH

Email: sweisner@rad-new.com 
Tel : 020 7382 0437
Fax : 020 73740462

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