Jennifer Adams considers various options for financing a buy-to-let property and the tax implications for each.
The most straightforward method of financing a buy-to-let property is via the use of the landlord's own resources, if possible. Savings account interest rates are currently hovering around the 5% mark (with a return after basic rate tax of 4%: or 3% for higher-rate taxpayers) and the more cash invested in a rental property, the higher the percentage of return.
The downside of using your own cash is the lack of flexibility as the money will be tied up for the long term until the property is sold or remortgaged. Therefore, the majority of buy-to-let investors use a combination of their own resources and mortgages.
Remortgage other rental properties
HMRC's Business Income Manual at BIM45700 (“Specific deductions – interest:
