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Understanding the new Landlord Taxes – And How to Maximise Profit

In April 2017, some major changes were made to the buy-to-let tax system. As a result, many UK property investors were left concerned about the impact the new taxes would have on their profit margins, given that they could no longer offset their mortgage interest.

However, there are ways to boost ROI as a UK landlord, whilst remaining within the law. Here’s more information.

The New Tax Rules

Essentially, if you’re a higher-rate taxpayer, you’ll no longer be able to offset your mortgage interest against your profits made from renting. Tax relief is also being reduced gradually in the years leading to 2020, and will be replaced by a tax credit (20%).

Basic rate taxpayers may be affected too, as the new changes may push them into the higher tax paying bracket once rental income has been calculated.

Should Landlords be Concerned?

Not if you’re suitably well prepared. Here are a list of suggested steps to take to address the changing tax costs:

  • Familiarise yourself with the system. It’s important to understand the UK landlord tax system, so you can anticipate how much you’ll be paying at the end of each financial year. If you’re one of those people who struggles with things like tax, ask a financial advisor to help you.


  • Work out your costs. Identify exactly how much you’ll be paying in tax each year, and how this will affect your profit margins. It may be that you need to make some adjustments in order to generate the level of income you’re looking for.


  • Find the right buy-to-let property for sale. If you’ve not yet invested in UK property, make sure you’re looking in the right area, at houses that are the right price. The lower the mortgage rate on your property, the less it’ll cost you. If you’ve already got a property portfolio, take the opportunity to examine it in detail – to check none of your houses are ‘dead weight’, and eating into your overall profits.


  • Consider raising rents. Obviously, it’s not ideal to start raising rents, as it can deter tenants and anger those that are already in situ. However, in some circumstances, it may be the right thing to do, and will counterbalance the impact of higher tax rates.


  • Plan for the future. Search for buy-to-let property for sale in upcoming areas – where houses are still cheap, but likely to rise in price in the future. These types of property are ideal for boosting profits, and help support other less well performing houses in your portfolio. If you’re looking for a real bargain, try working with a property investment agent (who will have competitively priced properties on their books) or explore the option of buying a house at auction.

The Buy2Let Shop

If you’re about to invest in UK property, or you’re looking for new property investment opportunities for your existing portfolio, we can help. The Buy2Let Shop are a team of professional property investment agents, and we’re here to assist you throughout the purchase process – from finding the ideal buy-to-let property for sale, to sealing the deal at the perfect price.

To find out more, visit The Buy2Let Shop website today.

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