Landlords disadvantaged by tax relief cap.
The move to cap tax relief on buy-to-let mortgages by the former Chancellor of the Exchequer which starts next year could put private landlords at a disadvantage when calculating their tax returns.
This situation is causing landlords to sell properties back to themselves in an effort to reduce tax liabilities on the property they rent out, by selling their properties to a specially set up company, owned by them, landlords can avoid paying tax on certain expenses associated with the property.
Operating as a limited company they will be able to claim the costs of running their buy-to-lets as a business, such costs they will be able to take into account will be mortgage payments, wear and tear and maintenance, letting agents’ fees etc.
There will be upfront costs involved in changing the ownership of the property to a limited company, however they should pay less tax on the income longer term.
Advice should be sought from experts regarding taxation matters as they may vary according to different circumstances.
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