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Hi everyone,im looking to purchase my first buy to let.I currently earn £34k per year and I’m looking to buy a property that will bring in £700 - £800 per month in rental income. What tax implications would this have to me? Can I still claim the mortgage payments as an expense?
If you earn 34k now you only have around 10k more before your into Higher rate Tax
If that is triggered you will be effected by S24
You need to run the figs and account for S24
Lots of calculators on the internet I would recommend the RLA one
S24 is a killer for leveraged landlords so take great care
Learn Change and Adapt ?????
Just did a fag packet calc on 800pcm rent
and if your leveraging up its quit likely you will pay more Tax with S24
As your other income plus gross rent is within the basic rate tax band you will still get full relief for your mortgage interest on this purchase.
Director of Tax Peplows Limited
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I worked it out and its very close
If the rent is 800 pcm and there leveraged
it all depends how much the mortgage is
The problem with S24 being so close It only takes a pay rise in your into higher rate tax
Its a minefield
Thanks for your reply’s, so if my property was generating £700 per month and I’m still in the basic rate tax bracket I can deduct the mortgage payments from the profits before paying tax?
Sorry for the newbie nature of this post
The interest element of your mortgage payment but not the capital element of the monthly payments if a repayment mortgage.
You would also need to add any benefits in kind to your income as they with the rental payment may push you into HRT, eg a company car.
Have a look at DL posts and topics.
If affordable and tax is impt to you.
Increase contribution money into pensions ( this could be a SIPP and buy property related investments)
or buy in limited company.
used to mitigate section 24 and keep you under threshold thus staying as BRT.
In effect you are lowering salary. But diverting money efficiently.
I started some threads , as we are in similar position. Borderline BRT.
Wisdom involves an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs.
Don't forget S24 covers all financial costs
Bank Fees ect
on a salary of 34k its a close thing
This year you can still claim 50% of the finance costs as expenses. For the other 50% you get 20% tax relief, which works out the same for basic rate tax payers. So you would not pay any extra tax due to S24 this year.
It does not depend on how big the mortgage is (assuming the payments are less than the rent). Just on your total income - allowable expenses. 34k+12*800 = £43,600 which is less than the threshold of £46,350. Once you can not deduct any finance costs (2020) then it would be close. If your expenses were low and your salary increased faster than the threshold, then you might start to pay some extra tax due to S24. Or if the rent were raised.