Buy To Let Taxation

robinjohncook

I am looking for some advise on how to minimize my tax liability on 4 recently purchased buy to let homes. I'm already a higher rate tax payer with my normal job so that doesn't help.

The 4 will generate an annual income of £20k ish with my interest only mortgage payments costing about £12k so I understand I can offset that and also 10% for 'general upkeep'. I've also spent about £10k this year doing them up, new bathrooms, kitchens, carpets, etc. so I'm assuming the revenue will also take this in to account?

I'm planning to expand what I'm doing so a I was wondering whether it's better to set up a small company, even pay the wife a small wage (as she's currently a housewife). The business wouldn't make any profit as it would simply be used as the deposit on the next house.

So I'd appreciate any advise, hopefully from somebody who's gone through this......many thanks in advance for all the replies.

DawnW

Hi, I'm also a LL, though not on the same scale as you - just let out our own house as we have to live elsewhere currently due to work reasons. I have just done our tax returns (mine and husband's - as we jointly own the property we both have to do one). I spoke to a tax adviser before I did them because I have never done anything like that before. He told me that I could not claim money spent initially doing up property / making it ready for first tenants, and that in the first years of renting, the Revenue are not happy about large amounts spent on maintenance etc. I would strongly advise you to speak to a professional, especially as you are HR tax payer (I am just under). They could also advise re setting up a company etc if that is the best way forward. I would also recommend joining the NLA or similar organisation in case you get problems with tenants, and to advise on law as regards letting etc. Be careful to protect deposits and get gas boilers checked out by a professional once a year, these seem to be the key things.

It may (hopefully) seem obvious, but you would be surprised how many people don't seem to be taking this into account, make sure you can afford voids - periods where you have no tenants in the properties, as the mortgages will still need to be paid.

Good luck with your new enterprise - I personally have found it more of a pain than anything else, masses of extra work for very little return, but your approach is obviously different. When my current tenants decide to leave I will not be letting again though!