I was chatting to tax expert about various ways landlords can save paying tax on their buy-to-let properties.
He highlighted one aspect that many landlords may not of considered. This technique is particularly useful for landlords who are earning considerable amounts of rental income and are also fortunate to receive a high personal income taking them into the top rate tax bracket.
To save money a landlord needs to 'gear up.'
This means borrowing money against their residential investment property and thereby instantly increasing the amount of expenses incurred on their rental property.
They then should invest in a tax free income generating investment. When interest rates rise significantly they can then use their funds to repay their new outstanding buy-to-let mortgages. What a landlord should ensure is that the buy-to-let mortgage they opt for has low set up fees and a competitive interest rate.
Low interest rates appear to be one of the lynch pins of the Coalitions economic policies meaning that many landlords will make considerable rental profits for several years to come.
Therefore landlords looking to minimise their tax burden should consider gearing up. There will probably be financial costs with setting up the initial loans but this could be small compared to the potential tax savings.
The largest lender in the buy-to-let market, the Lloyds Group which includes the brands Birmingham Midshires, Cheltenham & Gloucester, Halifax, Bank of Scotland & Lloyds has just announced from 24 September, next Friday, that they will be reducing the number of properties they will lend on from nine to three.
This means that if you have 3 or more mortgages within the Lloyds Group you will no longer be able to use them to purchase properties. Currently the Lloyd’s Group has the best buy-to-let interest rates which require a 25% deposit.
This is a massive change to the mortgage market and any investor looking to purchase this year with 3 or more properties within the Lloyds Group should consider purchasing NOW.
If you wish to expand your property portfolio, call Tara on 016 4482154