The UK property market, whilst well known for being cyclical, has usually proved to be a safe long term investment, and in recent years this has resulted in the massive expansion of the buy-to-let property market. Add to this, a serious lack of public confidence in pension funds and the property market becomes even more attractive. As you probably know, buy-to-let involves investing in property with the expectation of capital growth, with the rental income from the tenants covering the mortgage and ideally, any other outgoings for maintenance and repairs. But these days, it’s not always as lucrative an investment as it used to be unless you have accurate property accounting and tax advice in place.  For example:

– Is your property a long-term, or medium-term investment?

– Will you need the services of a property management company, and have you budgeted for this?

– Have you complied with the legalities of Tenancy Agreements?

– Have you done your sums carefully? Remember the costs involved when changing tenants – Have you researched your local marketplace, and your competitors?

– Did you factor in your property tax costs on rental income over a certain level?

– Steer clear of any property requiring high maintenance (unless this is the sector you intend to invest in and you have budgeted for this)

– Remember to also factor in the new restrictions on loan interest relief for buy-to-let landlords

The latter point is particularly important and to give landlords time to adjust to this new rule, the restriction in the relief is being phased in by HMRC like this: – In 2017/2018 the deduction from rental income will be restricted to 75% of finance costs, with the remaining 25% available as a basic rate tax reduction. In 2018/2019, 50% finance costs deduction and 50% given as a basic rate tax reduction. In 2019/2020, 25% finance costs deduction and 75% given as a basic rate tax reduction. In 2020/2021, all financing costs incurred by a landlord will be given as a basic rate tax reduction.

Please contact Jonathan.Curwen@affordbond.com for more information or use the Contact form here on our website.