Thinking of buy to let and income tax

[crofty1984]

Hello all,

I'm hoping I can pick your brains for advice.

I'm thinking of getting a wee flat and doing a buy to let. The area I'm looking in you could get a 1 bed flat for £60,000. 90% LTV (thinking of worst case scenario here) are about £95 pm interest only and £250 capital.
Typically rent is £350pm.

Think I'd not be too interested in the capital, or day-to day wage top-up. I want to use it as the start of what may be my pension in 30 years time (planning ahead!) so would immediately save any profit to put towards the next one.

I know the gov. is trying to bum landlords up the bottom at the moment with the intent to tax the turnover and not the profit. I think the maths may still work out that it's worth doing for me though. I can also afford to pay the interest only mortgage easily enough if the place is empty.
How does it stand with regards to income tax?

I'm in the 40% bracket on £low-40s PAYE
My partner (not married if that makes any difference. Probably in a couple of years) is on about £15k

What's the best thing to do in this situation? Put it in her name? Do it as a business? Have it in my name? (I'm assuming not)

Cheers!

[Eric Mc]

The government has no intention at all to tax rental "turnover" rather than profit. The fundamental rules have not been changed i.e. the tax is charged on the profits remaining after all ALLOWABLE rental costs have been deducted from the gross rental takings. These costs are -

Advertising for tenants
Legal costs related to debt collecting
Legal costs relating to lease renewals
Repairs and maintenance of the property
Council Tax or Water Charges paid by the landlord
Light and heat costs paid by the landlord
Agents fees
Management fees
Service charges paid by the landlord
Ground rents paid by the landlord
Insurance costs paid by the landlord
Interest and financial charges

The change relates to the last item i.e. "Interest and financial charges". They are still allowed as a tax deductible cost. HOWEVER, tax relief is going to be severely restricted - essentially the landlord will only be able to get a reduction in their 20% tax liability. The change is being phased on over four years starting with tax year 2017/18.

[KevinCorvetteC6]

I doubt you will find a BTL mortgage for more than 75% LTV and interest rates are generally 1-2% higher than a domestic mortgage. Profit is taxable and you can deduct legitimate expenditure.