We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
PLEASE READ BEFORE POSTING: Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Most tax efficient way to finance BTL?
landlordy
Posts: 1 Newbie
I'm in the process of purchasing a BTL in Kent and want some opinions on the financing options.
Firstly some background info, I'm not a UK resident so I fall under the non UK resident landlord scheme with respect to taxation and believe I'll have 20% tax withheld by the letting agent. I will then make up recover the differences in tax with my home country with the double taxation treaties.
The house I bought was £94,500. I can currently expect around £650pm rent so I'd be getting a decent yield. I'll be mortgaging 75% of the £94,500 so £70,850. Lets say I can get a rate of 5.5%.
As this property is to go towards funding my retirement in 20 years, my intention is to hold on to it and have it paid off by then. I'll be adding more properties to the portfolio in time.
What would be the most tax efficient way to finance the property? I considered a simple BTL repayment mortgage but the further into the term I go the more tax I'll be paying on the rental income due the decreasing interest part of the mortgage repayment.
If I go interest only BTL that will allow me to offset a lot more of the rent against tax. However I will need some other means to generate the funds to pay off the property. I don't think putting the difference between the repayment and interest only mortgages (obviously tracking the interest rates) into a saving account to be sufficent to pay off the capital in 20 years so what other options do I have?
With the state of the financial world I'm not sure what will reliably generate the required capital in a tax efficient manner.
Firstly some background info, I'm not a UK resident so I fall under the non UK resident landlord scheme with respect to taxation and believe I'll have 20% tax withheld by the letting agent. I will then make up recover the differences in tax with my home country with the double taxation treaties.
The house I bought was £94,500. I can currently expect around £650pm rent so I'd be getting a decent yield. I'll be mortgaging 75% of the £94,500 so £70,850. Lets say I can get a rate of 5.5%.
As this property is to go towards funding my retirement in 20 years, my intention is to hold on to it and have it paid off by then. I'll be adding more properties to the portfolio in time.
What would be the most tax efficient way to finance the property? I considered a simple BTL repayment mortgage but the further into the term I go the more tax I'll be paying on the rental income due the decreasing interest part of the mortgage repayment.
If I go interest only BTL that will allow me to offset a lot more of the rent against tax. However I will need some other means to generate the funds to pay off the property. I don't think putting the difference between the repayment and interest only mortgages (obviously tracking the interest rates) into a saving account to be sufficent to pay off the capital in 20 years so what other options do I have?
With the state of the financial world I'm not sure what will reliably generate the required capital in a tax efficient manner.
0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.4K Banking & Borrowing
- 253.7K Reduce Debt & Boost Income
- 454.4K Spending & Discounts
- 245.4K Work, Benefits & Business
- 601.3K Mortgages, Homes & Bills
- 177.6K Life & Family
- 259.3K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards