If you take out a buy to let mortgage on your investment property, interest (but not any element of capital repayment) is allowable as a tax expense against the rents received.

However, did you also know that if you took out any other borrowings to buy the property interest on that is also allowable?

Therefore, suppose you’ve taken out a buy to let mortgage on the property itself for 70% loan to value and the 30% deposit has been funded by an increase in the mortgage on your main residence. In this instance you can charge the interest on the buy to let mortgage. However, you can also charge the interest on the deposit element which has been funded by increasing the mortgage on your home.

The same principle applies if you’ve taken out a personal loan or are paying interest on a credit card for costs related to a property investment. These expenses are allowed, provided you have adequate tax records to ensure you can justify they are “wholly and exclusively” for the investment property.

If you are likely to be buying things on a credit card for the property I would suggest you use a separate credit card, only used for property transactions. So that if you do incur interest you can easily identify it as being part of your property expense.

To get more tips see

http://www.marywaring.co.uk/propertytaxsecrets.html

You must advise the taxman in the first year in which you own a property investment. For those of you who already receive a tax return you need to obtain the Land & Property supplement pages L1 and L2 from the tax office.

If you are one of those who do not have to do a tax return, (eg. Because you are under the PAYE system) then you must notify the tax office that you effectively have a new source of income.

If you own more than one property then you would certainly want to calculate the profit and loss from each property. That will allow you to see how well each property is performing. However, for tax purposes the profits and losses can be set against each other and effectively treated as a single rental business. So you only complete one return for all your properties.

Effectively what this means is that the rent from one property can be used to offset expenses from another. Therefore if you have one property that makes a tax profit and another property that makes a tax loss, the 2 results get netted together.

For more advise on property tax click HERE

Yesterday, the Rudd report suggested that private landlords sign up to a national register. This is in an attempt to prevent bad practice by unscrupulous landlords.

A landlord can be struck off the register and banned from renting out property, if they do not adequately look after the interest of their tenants, with regard to for example repairs, keeping deposits etc

One additional piece of security for tenants was the suggestion that tenants would be given at least two months to leave if a landlord’s property is repossessed. This is of course particularly relevant in the current environment where some landlords are having difficulty in paying their mortgage.

The report has also raised concern about the fact that estate agents and letting agents need no professional qualification. The government has suggested an independent regulator to oversee their practise.

What do you think? Good idea to clean up the industry or is the government trying to be “Big Brother” without and associated benefit to the sector?

European Law is now dictating that the UK tax rules for UK holiday lets needs to be brought into line.

This is bad news for those with a UK holiday let.

The UK has for many years had generous tax rules regarding UK holiday homes.

If you taxes allowable costs of running the property (eg maintenance, letting fees, mortgage interest costs, cleaning etc) are in excess of the income, it is currently possible to offset the loss against earned income. For example, if your income from letting the property was £10K, but costs were £15K you would be able to get tax relief for the £5K against tax already paid on your earned income. For a higher rate tax payer that would mean a refund of £5K @ 40% i.e. £2K.

If you made a profit on selling there were also generous reliefs available to reduce the capital gains tax bill, via taper relief. However, European Law has deemed this unfair and both reliefs will be withdrawn at the end of the current tax year 2009/2010.

So this is bad news for anyone with a UK holiday let.

However, it also means that if you have an overseas holiday let there is a window of opportunity until 5^th April 2010 to take advantage of the rules that have been in place for a UK holiday let.

If you have made an operating loss with your expenses in excess of income, and if you have sold at a profit and paid capital gains tax you are able to review your tax calculations. A significant refund may be due to you.

I am happy to recommend a tax adviser if you need help.

In most geographical areas the fall in the property market has severely reduced the number of properties available for sale. Another contributing factor is the pitifully low interest a vendor would earn with the funds if they did sell. As a result unless you are in the position of having to sell most are holding off until the market improves.

But the reverse side of the coin is that because of the lower prices and historically low interest rates the number of enquiries has risen. This has ensured house prices in many areas have remained reasonably stable and in some instances has led buyers to pay more than the asking price in the face of such a shortage of possibilities for anyone who is determined to move.

When we add to this the issue that new build supply had significantly reduced since last year the gap can only get bigger.

But based on the above, the law of supply and demand suggests prices will therefore rise. What do you think?

Following recent increases in the swap rates The Financial Times has reported that a number of lenders are set to increase their fixed mortgage rates this week. Rates most likely to be increased are on the longer term eg 5 year and 10 year fixed rates.

The majority of rates have not yet been increased. Therefore if your adviser has given you a rate do start the application process ASAP before the rate is withdrawn

How do you get started, once you’ve decided it’s the right time to get involved in property investment?

If you’re keen to just jump straight in you’re likely to want to go and view a number of the properties available for sale in the area you are inetrsted in. To see how good your negotiating skills are you may just put in a number of low offers and see if any get accepted.

Is this a sensible approach?

The short answer is “No”. This si likely to lead to a lot of wasted hours. Whilst it’s very exciting to go straight out and start “doing” it is much more sensible to sit down and consider what your investment strategy is. .e. do you want to buy for long term capital growth: do you want to achieve monthly cashflow.

Dependant on which option you choose this will determine the type of property you need to invest in to fulfil this need.

The following are all different options to consider:

• Buy to let capital- monthly cashflow is flat, but the investment has the potential for significant capital growth
• Buying a distressed/repossessed house at undervalue Buy to let income i.e. generate a monthly income with rents in excess of costs
• Back to back trading i.e. Buy and sell within a short time frame to make a profit
• Investing abroad

Have you considered which option is most appropriate for you and your circumstances?

Rightmove, the property website has been reported in The Financial Times as having a significant increase in house hunters to its website. For the first time in April 2009 traffic to the website has increased relative to the same month in 2008. Interest on the website is now running at a similar level to that shown before the downturn.

In addition, it has been reported that there has been a significant decline in the rate at which estate agents are leaving the industry. No estate agents have left the industry in 2009.

Rightmove’s board of directors said that the outlook for the UK property market was now “cautiously positive” and that 2009 pre-tax profits should be ahead of its previous expectations.

A glimmer of light at last?