Finance

How to Handle the Buy-to-Let Tax

Are you victim of the recent increase in tax rates? The inflated taxes have left landlords confused, uncertain and perplexed at the same time. Due to the high risk involved, it has become very difficult for anyone to make the decision of buying property on mortgage. However, there are options you can still use to handle your expensive buy-to-let mortgage in a profitable way. You can go for remortgage, get registered as a company and even increase the rents depending on your market. Some of the tips to handle the increased tax include:

1.     Use Remortgage to Your Benefit

There are many different ways you can handle the new tax laws on buy-to-let mortgage. If you get a buy-to-let property on around £120,000 mortgage, you can easily earn as much as £800 as monthly income. Annually, the amount will be more than £8000. An average property holder will then deduct other expenses such as agent’s fees, mortgage interest and other expenses from the total cost. The total annual profit will be around £612.

However, due to extremely high tax rates, it has become very difficult to earn profit from your house after the tax rates have increased. Add the total percentage of tax on the transaction and you will lose around £500 on an average. Sometimes, profits can turn into losses after a tax is calculated on it. Other than this, it is also difficult to save money for future uses on your interest bills.

2.     You Can Register as a Company

If you are a buy-to-let owner, this is the best way you can reduce the total costs of taxes. You can substantially increase your total income and expenses. The government has recently decided to cut down tax of around 19pc on all registered corporations. It is very important to start operating as a company and not as a private equity. Make sure you contact the right legal advisor before becoming a corporation. There are a lot of legal matters involved and therefore it is necessary to keep a regular check.

Other than this, you will also be able to cut your offset costs. Working as a private company is the best way to increase your profits overall.

3.     Reduce Loans by Selling Your Additional Properties

In rare circumstances, if there is no other way to increase your rental income, the best way is to get rid of your property. Rather than getting charged extra amount every month, it is better to sale your property to reduce current loans. It is essential to reassess your total property value and make a decision to sell your property at the right time.

4.     Increase Price of Monthly Rents

This is perhaps the easiest and simplest way to deal with the higher tax prices. You can lift the price of your rent. Most of the landlords will be doing the same, thus it won’t make much affect on the market demand and supply. After the recent increase in tax prices, it is only natural for rent costs to go upward as well.