Beat the Tax Man ! Here Are My Top 5 Tips for Buy-To-Let Investors

Posted on January 29th, 2020.

The new year has begun, and the new Financial Year will start in April. For Buy-to-Let Investors it means HMRC are phasing in the final part of their taxation rules. The Buy-to-Let sector has seen a marked decrease in new mortgages, just a year ago only 4300 new home mortgages were completed by landlords, over 8 % down on the previous year.

As of April this year, Landlords will no longer be able to offset their mortgage interest before tax is calculated. Instead, there will be a 20% credit applied regardless of their tax band.

Few landlords are expanding their portfolio and there is a real threat that if interest rates rise soon, it could make their properties unprofitable. Rent increases will be inevitable.

The tidal wave of change in the Buy-to-Let Sector in the past few years have seen profit margins narrow. Here are my top 5 tips on how to beat the Tax Man.

  1. Set up a Limited Company

Buying  an investment property through a  limited company will bypass the high tax liability. Limited companies pay Corporation Tax instead of income tax which can work out cheaper. The Stamp Duty is still payable,  Capital Gains Tax if being transferred from private individual ownership and fees for transferring the mortgage to a limited company. There are fewer mortgage products available to limited companies, so as ever, it pays to shop around.

  1. Short Lets

Holiday lets have more favourable tax rules for Landlords, whereby more expenses can be off set against any tax liabilities. As ever, holiday lets  come with their own set of rules. Crucially, the property must be fully furnished and that it can’t be occupied by a single tenant for more than 155 days of the year. This works well for Landlords who live close by and can be on hand to provide an around the clock service.

  1. Diversify

High property prices in London and the South East have encouraged Landlords to look further afield. Properties in the Midlands and The North can be bought for considerably less, offering far more attractive returns. Best practice is to instruct a reputable Letting Agent to manage the property which will incur additional fees but will have practical advantages as you won’t have to deal with the tenants yourself or rent collection.

  1. Investment Trusts

An Investment trust is an alternative tax efficient way to buy property if feeling discouraged by the new tax rules. This is called a Real Estate Investment Trust (REIT). The focus is on commercial property, a reputable financial advisor will ensure that they work with only the best fund managers to ensure the highest returns. Some portfolios have very lucrative investments in Prime areas that will create passive income without all the responsibilities of buy-to let.

  1. Take Advantage of Low Mortgage Rates

The new tax rules have undoubtedly deterred many landlords form expanding their portfolios. Interest rates are at some of their lowest in their 400-year history. Whilst the base rate has risen to 0.75 % since August 2018, there are opportunities in the current mortgage market. If your current deal is coming to an end, there is the option to refinance. Go for the lowest fixed rate deal for the longest period available. This could save you thousands of pounds over a 3 to 5-year period, (regardless of rate rises) and will help you to plan by consolidating your finances. If you have a portfolio, the compound effect of repeating this exercise when reviewing each property is hugely beneficial. Due to the lack of activity in the Buy-to let market, there are numerous lenders offering competitive deals to entice investors back to the market, including your current lender. *There are costs associated with changing lenders, it pays to do your homework, so crunch the numbers to see if it’s worthwhile.


If you’d like to know more about Buy-To-Let or are interested in working with me, I can advise on a range of things. From what and where to buy and how to maximise the income potential of your current investments, whilst keeping you on the right side of the law.

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