BTL tax question

Zammo

I'm about to rent my property as I am moving in with my girlfriend. I am also thinking of buying another property to rent as I have a large amount of cash saved and a lot of equity in property number 1.

Am I right in thinking that for tax purposes the entire rental income will be combined with my salary. I'm a little concerned that this will then push me into the 40% tax bracket.

Or do you only pay tax on rental profits??

Also I was wondering about the best way of raising the cash for the second rental property. Is it better to Let to buy and release the equity in my first property or just get a straight BTL mortgage against the second property?

:money:

hearts

You only pay tax on the profit after deducting Interest payments but NOT repayments. You also can deduct costs.

DJM2007

At the moment, rates are still relatively low but slowly on the increase, so I'd go straight in with a decent BTL mortgage and save your equity for a rainy day (or when the mortgage rate increases).

thesaint

Zammo,
Is this a joke? You have been quite venomous about BTL landlords, and have said house prices are ridiculously high now.

Guy_Montag

scab!


..............

lynzpower

why dont you just sell it?

Wings

"Am I right in thinking that for tax purposes the entire rental income will be combined with my salary. I'm a little concerned that this will then push me into the 40% tax bracket."

You will be able to deduct from the rental income all of the mortgage interests, plus all additional costs, repairs, letting agents fees etc. etc. Should you then find yourself in the 40% tax bracket, then you could consider making a Pension Contribution from your Earned Income, the allowance for the same will/may remove you out of the 40% tax band.

One should also go into BTL with thoughts on the possibilty of CGT and IHT arising in the future, so plan accordingly to avoid the same.

gonzosbro

Wings is correct.

But you only pay CGT if you sell. If you keep it, you can avoid this.