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.


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 - 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.




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
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

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
Personal finance

Pension contributions: what you need to declare on your tax return

Make sure you don't forget to declare your pension contributions in your tax return
28 Jan 2020

Most Popular

Silver and other precious metals

You should all own some silver. Just don’t expect it to make you rich

Silver is cool, beautiful and immensely useful. But for investors it's the most frustrating of metals. Dominic Frisby explains why you should own some…
12 Feb 2020

Money Minute Wednesday 12 February: grim times for European industry

Today's Money Minute previews industrial production in the eurozone, plus the latest from America's central bank.
12 Feb 2020
Investment strategy

The secret to avoiding being panicked out of your portfolio

With the coronavirus continuing to occupy headlines, investors still aren’t sure how to react. But the one thing you mustn’t do is panic. Tim Price ex…
11 Feb 2020

Is 2020 the year for European small-cap stocks?

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, on why he believes European small-cap stocks are performing well.
12 Feb 2019