Merryn's Blog

How to keep your buy-to-let property and keep your tax bill down

There is one way to keep your favourite buy-to-let and to keep your tax bill down, says Merryn Somerset Webb. Change it into a holiday let.

151109-buy-to-let

Thinking of selling up to avoid the changes to the buy-to-let tax relief rules? You aren't alone. Now that people are starting to do the maths on the shift, and it has become clear that most of the suggested avoidance strategies won't work, stories of sellers are beginning to emerge.

However, there is one way to keep your favourite buy-to-let and to keep your tax bill down: change your long-term buy-to-let into a holiday let.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Operate as a furnished holiday let and you can offset all your expenses (wear and tear, mortgage interest etc) against the rental income at your marginal rate of tax regardless of what that is. You can also carry forward losses just as with any other trading business and claim entrepreneurs relief when you sell (cutting your CGT to 10%). Finally, you can have a go at claiming inheritance tax relief if you provide a service of any kind (breakfast etc) to your holidaymakers. How's that for a deal?

The other piece of good news is that, while holiday lets are clearly harder work than long-term lets (and so unlikely to be an option for those with big buy-to-let portfolios), the yields on offer are much higher. The only problem, says Teresa Hunter in the Telegraph, is that mortgages on holiday lets are much harder to get than those on buy-to-let properties (remember that if you change the use of your property you have to tell your lender).

Advertisement
Advertisement - Article continues below

If you want to make the change, you will need to go to some of the smaller lenders. Hunter suggests the Leeds Building Society for its dedicated range of holiday home mortgages, and the Newbury Building Society, which will lend up to 75% of the value of a holiday home depending on your income levels.

Advertisement

Recommended

Visit/519223/how-can-we-raise-more-money-in-tax
Economy

What are the best ways of raising more money in tax?

Given that whoever wins next week's election will be going on a massive spending spree, we're going to need to raise at least some of that money throu…
5 Dec 2019
Visit/518715/what-are-the-biggest-mistakes-investors-make-when-it-comes-to-tax
Investment strategy

What are the biggest mistakes investors make when it comes to tax?

The tax implications of an investment are something we rarely consider until after the event. That could prove to be an expensive mistake, says Domini…
27 Nov 2019
Visit/516603/how-tax-has-shaped-the-course-of-human-history
Economy

How tax has shaped the course of human history

Taxation is as old as civilisation itself. But how much is too much? Dominic Frisby looks at how taxation, war and society have evolved together over …
16 Oct 2019
Visit/520306/self-assessment-dont-miss-the-deadline-for-online-tax-returns
Personal finance

Self-assessment: don’t miss the deadline for online tax returns

If you are self-employed, rent out a property or earn income from savings, investments and dividends, you need to fill in a tax return. And the deadli…
13 Jan 2020

Most Popular

Visit/520525/currency-corner-how-high-can-the-pound-go-against-the-euro-in-2020
Currencies

Currency Corner: how high can the pound go against the euro in 2020?

In the month in which we should finally leave the European Union, Dominic Frisby takes a look at the pound vs the euro and asks just how high sterling…
13 Jan 2020
Visit/520575/20-predictions-for-the-2020s
Investments

Where will markets be in 2030? Here are 20 forecasts for the 2020s

A lot has changed in the last ten years – stockmarkets soared, technology transformed our lives and politics has changed beyond measure. Here, Dominic…
14 Jan 2020
Visit/520338/how-much-the-state-pension-will-rise-by-this-year
Personal finance

How much the state pension will rise by this year

While Boris Johnson promised to hold a full budget within 100 days of his election victory, many of the details of next year’s state pension increases…
10 Jan 2020
Visit/520553/money-minute-wednesday-15-january
Economy

Money Minute Wednesday 15 January: UK inflation and house prices

In today’s Money Minute, we look ahead to the latest UK inflation and house price figures, plus we have Germany’s GDP data for 2019.
15 Jan 2020