Buy-to-let tax guide: Five simple ways to be tax efficient

Married couples can save tax by transferring property ownership to the lower earner

When it comes to buy-to-let income, there are simpler ways than setting up a company to be tax efficient:

  1. If you are married, make sure the lower earner owns the rental property – or most of it – to benefit from a lower tax band. You can transfer property between spouses through a simple legal process, without paying any tax. Profit is split proportionally to your ownership, as long as you inform HMRC through a special form that the split is not 50/50.
  2. Even if you have the funds to pay off your buy-to-let mortgage, it usually makes sense not to do so: you can then still claim the relief on mortgage interest payments, where you’d otherwise pay more in tax.
  3. To help your cash flow, time big revenue expenses to be in a tax year when you would have made a profit.
  4. Carry forward any remaining losses until they are ‘wiped out’ by profits. With a bit of planning, this can save you thousands of pounds over several years.
  5. Lucky enough to own multiple rental homes? Offset losses on one against profits on the rest, as your tax liability is calculated across your whole property portfolio. However, you can’t offset against other income sources.
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