Buy To Let Mortgages

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Buy To Let Mortgages have become popular over the last few years with investors looking for an alternative form of investment to the stock market or as an alternative to the traditional pension scheme. They will enable you to buy a property for the explicit purpose of letting it out and will typically be a second mortgage. There are risks associated with buy to let schemes so it is best to take advice before applying.

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With buy to let, expenses can be deducted from profits. Repairs and maintenance are the biggest expense after mortgage interest payments.You can take off expenses that prevent the property from deteriorating. Examples include exterior and interior painting stone-cleaning, damp treatment, roof repairs, furniture repairs and repairs to lifts and other machines that form part of the property. You cannot deduct the cost of capital expenditure incurred on improvements, additions and alterations to the property. Nor can you claim a deduction for the cost of notional repairs that are no longer required as a result of this capital expenditure. If you are in doubt whether any work on the property is a repair or maintenance, ask your Inland Revenue office or tax adviser.

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Letting residential property can be a profitable business. Obtaining mortgages and buying large properties in busy cities is one strategy that can work. Plenty of single people who are not in a position to buy are looking for short-term rental accomodation and may be willing to pay a high rent. Each 'bedroom' can be let separately or the entire house could be let to students. Keep a rent book and keep good financial records including a record of mortgage interest payments and receipts for any materials bought for property repairs

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Another area that should be considered before opting for buy to let mortgages is valuation for tax purposes; The appropriate approach to be taken in any particular case will depend upon a variety of factors, but we cannot be too prescriptive as to the appropriate approach to be taken in any one case. Valuers must use their judgement and experience to decide on the appropriate cost effective approach on the balance of the facts available. It is important not to lose sight of fundamentals, particularly for minority holdings in property investment companies which are generally much more difficult to value than control holdings.

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One area that affects buy to let is business taper relief; a business of letting residential accommodation is not classified as a trade even though the income tax profit from such a business is worked out in the same way as a trade. Therefore, if you use the house in your property rental business it does not normally qualify for BAT relief. This would also be the case if you carried on this business in partnership. There are two main exceptions. Business assets taper relief may be available if: you are letting furnished holiday accommodation as a trade. Check with your tax office if you need to know what counts as a furnished holiday letting business; or the property is let to a qualifying company which uses it in its trade.