Buy-to-let is a good segment in properties business and the concept has been thriving for more than two decades. However, lately things have change towards challenging nature with relentless tax attack and stamp duty surcharge. However, below are some tips to minimize worries:
It is undoubtedly true that property still is a good investment as it is a combination of income and capital growth. Amid the tax chaos it is important to know the government has not cut tax relief for the companies and hence you only need to pay corporation tax and not the income tax. It is lower in many countries including United Kingdom.
The Bank of England’s Prudential Regulation Authority has come up with the criteria to demonstrate investors can afford the mortgage if rates rise and also to show rental income will be more than 45 percent higher than mortgage repayments. The limited companies are not included in such changes and can also avoid capital gains tax by incorporation, but you need to show it as a fulltime job or business.
It is also suggested to do the properties managing work yourself instead of hiring an agent. The person may create more work for you if you pass on the day-to-day running of the property. Also, management fees may eat away about 15 percent of your rental income.
It is also suggested to take landlord insurance as it will cover contents and also legal disputes with tenants.