11:48 AM, 16th September 2021, About a month ago 4
Like so many other Landlords, we’re at a crossroads at present, and about to diversify into the Holiday Let business. It’s something we’ve explored before, especially as two of our BTL properties are cottages in a tourist area, which cottages.com and others have been keen to put on their books, but we decided (luckily when the Covid lockdown is considered) against this, as they are 120 miles from home.
Then a cottage came up for sale in our home town, again in a tourist area, and we’ve decided to buy it for holiday lets, and the purchase is slowly going ahead. As holiday let mortgage interest rates are typically around 3% to 4%, as opposed to BTL re-mortgage rates of around 1.75%, we have decided to buy the cottage outright, by remortgaging 2 of the unencumbered (no mortgage) BTL properties we own, and have mortgage offers in place.
On one of the Holiday Let websites, it states that if finances are raised against your own residential property for purchase, then interest costs are not permitted against rental income but doesn’t mention those in our situation, so I assume what we’re doing is OK. Does anyone have experience of this?
Then comes the question of taxes! If the new property is registered in our own names, then any income would be subject to personal taxation, and already having 4 BTLs, plus other incomes, then we’re no doubt looking at 40% tax rates on profits. We still have a Ltd company, of which my partner and I are Directors & shareholders, which although not dormant, isn’t doing anything at the moment, so would using this be an opportunity not to be missed?
Could the holiday let be purchased in the Company name, obviously using our personal finances (re-mortgages) for doing so, probably as a Director’s loan?
We’re not particularly worried about Inheritance Tax, as we don’t have children. Does anybody else have a similar experience?
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