BTL advise please

VIGILANT22

The Inland Revenue will tax any individual on the profit they make on a Buy to Let property: therefore the difference between the mortgage interest and the other allowable expenses and the rental income received. For example, if you generated £12,000 per annum in rent, had £2,000 in allowable expenses and the mortgage interest was £8,000, you would be making a profit of £2,000. The Inland Revenue would then assess this as earned income and you would be subject to tax at the highest rate that you pay (potentially 40%).

rl290

As Vigilant says, a BTL landlord should make sure that really know their allowable tax expenses: mortgage interest, 10% of NET rent OR actual cost of wear and tear (it's one or the other, and you can't swap between years), costs of marketing, agency fees etc. Crucially, it does not include mortgage repayment, improvement to property etc.

However, just because the interest is tax deductible it does not mean it is worth keeping as some have suggested. See my post above for an explanation of why this is just plain stupid!

R