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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Dear sirs, I'd like to buy a property with the buy to let

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Dear sirs,
I'd like to buy a property with the buy to let scheme. I'm trying to understand how much of the Service cost, land cost and mortgage interest cost I can ask as tax relief.
Are the interest on the buy to let mortgage fully deducible or just a percentage of it?
What about the service cost and land cost?
Would you please be so kind to give me an example?
For example:
1) Leasehold property.
2) Rent income 500 per month --> 6,000£ per year
3) BuyToLet mortgage interest only monthly cost 200£ --> 2,400£ per year
4) Service and land cost 1000£ per year
5) High rate tax band (40%)
How much should I pay in taxes?
Thanks in advance.
Hi. What do you mean by "land cost", ground rent? Assuming you do, all the expenses you mention would be deductible in full. You would pay £1,040 in tax on the figures you have given me (£6,000 - £2,400 - 1,000 x 40%). From 2017/18, higher rate tax relief for mortgage interest will start to be withdrawn. You can read about that here. Take a look here for details of the types of expenses you can claim against your rental income. I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.
Hi Tony,thanks for your answer. Could you explain in a nutshell what the consequences of the 2017/18 withdrawn will be on the same example? Thanks in advance.
The tax relief for the interest will be given as a deduction from your overall tax liability on all income equal to 20% of the interest. At the moment, the interest is deducted from the rent itself and 40% tax relief is effectrively given because you are 40% taxpayer. In effect, your rental profit will increase for tax purposes as the interest will no longer be allowed as an expense. So, on £2,400 of interest, you will get £480 in tax relief as opposed to £960 now.
Customer: replied 2 years ago.
So just to make some calculation keeping the same data but changing the tax relief according to the 2017/2018:NOW : 6000 - 2400 - 1000 ---> 1040 To pay to the tax man
2017/2018 : 6000 - ? - 1000 ---> ? To pay to the tax manCould you please feel the question mark? Sorry just easier to understand....;-)
£1,520 (£5,000 x 40% - (£2,400 x 20%))
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