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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Is there any tax benefit from buying a buy to let property

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Is there any tax benefit from buying a buy to let property with an interest only mortgage rather than a repayment mortgage? Is any of the interest reclaimable if you only work part time and earn less than £10k p.a.?

If you live in the property before renting it out and/or live in it prior to selling it on, would you avoid CGT and if so what are the qualifying periods?

There isn't really a difference. You can offset the interest payments in both cases. The capital repayments on a repayment mortgage which will be low in the early years cannot be offset against the rent. At some stage, you will need to repay the loan so if you choose a repayment mortgage, you will be left with a greater sum if and when the property is sold as you will have repaid some of the capital you borrowed which won't necessarily be the case with an interest only mortgage.

Take a look here for information on homes and CGT. If a property has been your main home at some point and it has been let, you will qualify for exemption from CGT for the period the property was your main home and for a maximum of the last 18 months of ownership when you were not living there. Letting relief will reduce the remaining taxable gain but you would not necessarily avoid CGT completely. It's down to the facts and figures of the case.

I hope this helps but let me know if you have any further questions.
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