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Tax on buy to let by David Lawrenson of Letting Focus

Amidst the excitement, worry, legal issues and general administration which go hand in hand with buying and owning property, it is easy, perhaps almost convenient, to ‘forget’ about tax .
But with the right advice, you could save yourself a lot of trouble.
Here are some simple steps to help you.

Tax Advice
OK, step one is before you actually buy anything, consider how you are to own it. Will it be in your sole name, in joint names with a partner or possibly via a limited company? You should consider the options as the choice will affect the amount of tax due both on the rental income profits and on any gain made when the property is sold.
Step two is record keeping.
Keep a record (preferably a sales receipt, but if lost make a note of it somewhere – be it a grubby paper notepad or a blackberry) of ALL expenses you incur which relate to the cost of purchasing, owning and renting your property. . After all, if you have not kept a note of the expense then neither yourself nor an advisor can say if tax relief is due. Also include costs incurred prior to the date that any letting commenced and those which include some element of private expenditure

Selling a Property - Tax Implications
Step three is selling.
Any gain made on the sale of the property can be reduced in many ways, including: 1) Indexation Allowance – Intended to remove any element of gain arising as a result of inflation, but now available only to companies 2) Taper Relief – Available for properties owned since April 1998. The amount due depends on the number of years owned and whether the property can be classed as a business asset. Please note that as from April 2008, this relief will be abolished. 3)Private Residence Relief – Any period of time when the property was your main home is exempt from tax, together with the last 3 years of ownership and 4) Residential Lettings Relief – If you have previously rented out your main residence, you are entitled to claim up to £40,000 as an exemption.
Property tax needs careful planning at all stages - even when you buy it.
In particular, if you are buying a property for your son and daughter to live in while at university, you should think carefully about who owns the property - as getting this right could save you a lot of money in tax. It might be worth putting it in your offsprings name.
To read more about Student Lets, check out this article: http://www.lettingfocus.com/pages/myarticles_student_lettings.html

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the landlords’ expert and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased
seminars for buy to let investors and landlords as well as one to one advice covering all aspects of being a landlord and investing in property.
Unlike many in the still largely unreguated buy to let and property “advice” business I am not linked to a property company, developer, estate agency or bridging loan provider.
As such I am able to give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.

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