Buy to Let Tax Advice Guide

Helping Landlords Pay Less Income Tax & Capital Gains Tax on their Letting Property

Taxcafe has been helping buy to let investors with their tax planning for over 15 years.

We have a range of tax advice guides that cover all the main tax issues : calculating capital gains tax and income tax, tax deductible expenses and how to reduce your tax bill.

Our main buy to let tax guide is How to Save Property Tax. We've been publishing this book since 2002 and improved and expanded it by speaking to property investors and seeing what tax information they want most.

You can read the latest edition here: How to Save Property Tax.

Another popular guide we publish is called Using a Property Company to Save Tax. This guide explains the pros and cons of putting your rental properties into a company. The basic idea is that, instead of paying income tax at 40% and capital gains tax at 28%, you can pay corporation tax at just 20%.

Of course, it's not quite as simple as that in practice. Although your company may pay less tax, company owners often pay additional tax when they extract money from their companies.

Nevertheless this guide shows, using a number of detailed case studies, how an investor using a company could end up significantly better off than an investor who owns properties personally

You can read the latest edition here: Using a Property Company to Save Tax.

Buy to let Income Tax

With interest rates still so low property investors, including those with buy to let mortgages, are making handsome rental profits. These profits are subject to income tax. If you have income from another source (such as a job or another business) there's a good chance you will be paying 40% income tax on these profits.

The easiest way to reduce your tax bill is by claiming all the tax deductible expenses you can. These include mortgage interest, property repairs, letting agent fees and general administrative expenses.

More complex tax planning can also be carried out in some circumstances. For example, it may be worth transferring properties to your spouse if he or she pays income tax at a lower rate than you do - eg 20% versus 40%.

Looking at tax deductible expenses, we are always amazed how many landlords do not claim all the expenses to which they are entitled, eg the cost of using your car in your property rental business or the expenses related to a home office. Property investors can also claim capital allowances in certain circumstances.

Those that do claim certain types of expense often do not claim enough. A good example is mortgage interest. The rules can be quite complex which is why our guide contains over 10 pages of advice on maximising tax deductible mortgage interest claims.

What the guide does not contain is aggressive tax avoidance advice, just tried and tested tax planning information. The author, Carl Bayley ACA, is a chartered accountant who has been advising property investors for over 30 years. Carl is vice-chairman of the Institute of Chartered Accountants tax faculty and a member of their governing council.

Buy to Let Capital Gains Tax

Capital gains tax is arguably the tax that property investors fear most. Although the top rate of CGT (28%) is much lower than the top income tax rate (45%), the amounts involved are usually significant.

Capital gains tax is complex but there is also a huge amount of scope to do constructive tax planning.

Our guide How to Save Property Tax contains a huge amount of CGT planning info. we explain how its calculated and all the tried and tested techniques you can follow to reduce your tax bill.

Each tax planning idea is accompanied by at least one real life example.