APRIL 2020 BRINGS NEW TAX IMPLICATIONS FOR BUY TO LET LANDLORDS!
But before you sell consider the following:
Despite changes to the taxation implications, Landlords need to carefully consider whether there really are better alternative homes for their money – or whether their Buy to Let properties still represent a great asset for them.
OBVIOUSLY, one of the most important things is to ensure that you continue to pay the most competitive rate of interest on your Buy to Let mortgage, so call us TODAY for a FREE BUY TO LET REVIEW!*
Tel: 01202 874100
Things to consider if you are thinking of selling your Buy to Let property :-
If you sell your rental property, you will have tax to pay immediately on the capital growth.
After you have deducted the selling costs and tax, how much money are you actually left with?
If you then invested this money elsewhere, would you receive both an income and a potential capital gain?
Remember that your return is based on the NET EQUITY in your Buy to Let property, rather than on the value of the property!
You have a property worth £250,000 and a mortgage of £185,000.
You purchased the property for £185,000.
You are thinking of selling …
Your Gross Profit is £65,000
Less Estate Agents Fees est (1.5% plus VAT) £4,500
Less Legal Fees est £1,000
Taxable Profit £59,500
Tax est at 28% on £59,500 = £16,660
Which means that you will only have £42,840 available to reinvest!
If you kept the property
In the Bournemouth area, we would expect a property worth £250,000 to generate rent of around £1,000 per month.
Less per month, mortgage payment of £415***, Buildings Insurance £32,
Maintenance Allowance 10% of rent £100.
MONTHLY INCOME £453 which is £5,436.
Based on the £42,840 above which you would have available to reinvest if you sold, you would need to obtain a return of in excess of 12.7% to improve on your investment!
And this excludes any capital growth which you could make.
(Willowlace Ltd cannot help you with investments or taxation, but we can recommend specialists who can help you with this. Willowlace Ltd cannot guarantee any capital growth on a Buy to Let property.)
*FREE REVIEWS only available if you book a review with Willowlace Ltd BEFORE the end of August 2020.
** Figures are based on an actual example or a rental property.
*** on a mortgage of £185,000 at an example rate of 2.69% interest only – although better rates may be available