LETTING & ESTATE AGENT

Nine Ways To Maximise Your Buy-To-Let Profits

Nine Ways To Maximise Your Buy-To-Let Profits
Many landlords are concerned that announced tax changes in the buy-to-let sector will wipe out their profits. So, how can you claim against the tax? Most of the basics still apply – buying and furnishing properties are capital expenditure and therefore not claimable – but there are elements of your portfolio that are claimable.

Mortgage interest

You are currently allowed to offset your mortgage interest against your tax bill at your personal tax rate. Unfortunately, this is set to change – controversially. Landlords won’t be able to deduct their mortgage from their rental in come once the changes are implemented. Instead, you will be taxed on the rent you have received, not the profit you make. Therefore, you can be taxed on profit that isn’t there – you can be taxed more than 100% of your profit.Mortgage Mortgage fees Broker and arrangement fees are tax deductible and claimed for the year that the mortgage was arranged. Letting agent fees Based on a national average rent of £749 and an average agent’s fee of 10-15pc of the monthly income, you can claim back all of these. This could equate to £1,350 a year. Securing a tenant Landlords who find tenants without the help of an agent can claim back the cost of advertising for tenants, purchasing tenancy agreement, credit checking and other costs. You can expect these to cost roughly £300 each time a new tenant moves into your property. Building and contents insurance Cover for low-risk buy-to-let properties costs around £200 a year. This is claimable. Maintenance and repairs Although getting the property fit for purpose is capital expenditure, keeping it that way isn’t. Wear and tear is claimable. Maintenance costs include mending windows and doors, white goods, furniture and decorating. gutteringFurniture Another area subject to change. Your current 10pc wear and tear allowance is being replaced by an ‘actual costs’ tax allowance. Therefore, you will only be able to claim back on the furniture you replace in a tax year. Ground rent and service If you are a leaseholder you probably pay ground rent to the freeholder. You can also claim back the costs of gardening and electrical costs, cleaning, heating and lighting in common areas, and security and concierge staff. Depending on how many of these you incur a year, it would make sense to claim on them. Council tax and utility tax If you are paying the bills that a tenant would normally pay, you can claim back the whole cost. A major benefit is that you can claim these costs even during void periods. Tax 200-160Others Other direct costs such as phone calls, stationery and traveling expenses to make home visits are claimable. You can also claim back on the fee of an accountant who prepares your tax return. __ Martin & Co is a lettings specialist and we can help you get the most from your buy-to-let investment. If you have plans to expand your portfolio in the near future, contact your local Martin & Co office today or visit martinco.com.