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.
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?
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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).
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.
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