Is it a good time to buy to let? Taxes


The tax landscape has changed significantly in recent years, leaving many landlords with a greater tax burden and fewer opportunities to save costs in 2023.


Mortgage interest relief

Prior to April 2017, you could deduct the entirety of your mortgage interest payments from your rental income as an allowable business expense.


A less generous basic rate tax deduction limited to 20% of your finance costs, profits of the property business or total income — whichever is lowest — has since replaced this relief.


As a result, no longer being able to deduct the full mortgage interest from your rental profits could push you into a higher tax bracket, depending on your earnings.


However, the original tax relief system still applies to limited companies — but before you incorporate, make sure you understand the additional costs and responsibilities of being a director.


Stamp duty land tax

Unless you’re eligible for a relief or exemption, stamp duty land tax (SDLT) is payable on a portion of the value of most properties over £250,000.


If you own more than one residential property, you’ll usually need to pay an additional 3% surcharge on top of the standard SDLT rates, increasing your upfront costs.


Corporation tax rise

Letting properties via a limited company may also be more expensive this year. As of April 2023, companies with annual profits over £50,000 will need to pay a higher rate of corporation tax.


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