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An introduction to buy-to-let landlords tax cut

The economic downturn that began at the end of 2008 led to uncertainty in many markets. But one area where there were positive results was in housing, with rising property values leading to consistent profits for buy-to-let landlords. There are many ways where a buy-to-let landlords tax cut can be considered.

The economic downturn that began at the end of 2008 led to uncertainty in many markets. But one area where there were consistently positive results was in housing, with rising property values leading to considerable profits for buy-to-let landlords. This has led to calls for capital gains tax to be slashed. But any buy-to-let landlords tax cut will require careful consideration.

Buy-to-let landlords tax cut

The economic downturn that began at the end of 2008 led to uncertainty in many markets. But one area where there were positive results was in housing, with rising property values leading to considerable profits for buy-to-let landlords. This has led to calls for capital gains tax to be slashed. But any buy-to-let landlords tax cut will require careful consideration.

Buying to let: an overview

There are many reasons why buying to let has proved to be a worthwhile option for investors. Provided that careful plans are put in place, the operation can be a real money spinner. For anyone in the position of having access to cash, access to the buy-to-let market can be fairly straightforward. Cash puts any investor in a strong position for purchasing property.

The basic aspects which have to be considered are the location of the household, and the balance of the various costs – mortgage, insurance, maintenance and household bills compared to the income from rent. Other considerations are the viability of a particular property for the prospective tenants. Family home investments would be a waste of time in a neighbourhood full of student accommodation or lets for singles or couples.

So, if actually getting set up as a landlord is down to owning capital and showing common sense, what should you be aware of when it comes to the question of a buy-to-let landlords tax cut?

Capital gains tax (CGT)

CGT kicks in when any landlord sells their buy-to-let property for more than £10,600 profit. This applies to any home that is not a main residence (known as a principal private residence). If you only have a singular, principal property, then you don’t have to pay CGT. The Inland Revenue may ask for evidence that this is your sole household. The purchaser must pay stamp duty on buy-to-let properties (as is the case with other residential properties). However, buy-to-let landlords can deduct this from the tax bill.

According to the websiteof Her Majesty’s Customs and Revenue, if any property owner has spent extra money to sell or improve a property, certain costs can be deducted – including VAT and stamp duty.

How landlords can slash tax bills

When considering buy-to-let landlords tax cut, various factors can be taken into consideration. There are special rules that apply when properties have been a main residence. The time when any property was, in fact, the principal residence, are exempt from tax bills – as well as the last 36 months of ownership. It is also possible for CGT to be cut by living in the second property for a period, through lettings relief.

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