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How to increase your rental income as a buy to let investor and save tax

How to increase your rental income as a buy to let investor and save tax


Buy-to-let investors have suffered a barrage of government regulatory and legislative changes in recent years which has led to many of them selling their properties.  

Ranging from Section 24, the withdrawal of higher rate tax relief on mortgage interest for buy-to-let properties, Capital Gains Tax on residential property sales remaining taxed at the higher rate of 28% instead of 20%, new EPC requirements etc, etc.  The list goes on and on.

The onslaught has been relentless so it is little wonder that many buy-to-let landlords have become disillusioned and sold up.  However, all is not lost.  Every cloud has a silver lining.  In this case, it is the emergence of serviced accommodation as a viable alternative to buy-to-let for landlords who own residential properties.



Let me explain the benefits of serviced accommodation for you.


If you turn your buy-to-let property into a serviced accommodation you benefit on a number of levels.


1.     The property becomes taxed under furnished holiday lets legislation as long as you meet the criteria stipulated by the Act.  This means amongst other benefits that you can claim mortgage interest tax relief at your highest rate of tax.


2.     Your property qualifies for business rates instead of Council Tax because you are now running a business.  This usually means substantially lower business rates to pay than Council Tax.


3.     You can claim Capital Allowances on plant and machinery including home improvements such as a new kitchen, new bathroom, fitted wardrobes, kitchenettes, ensuites etc.


4.     Your net cash flow improves because your revenue will increase substantially in spite of the extra costs you will incur such as paying all of the household bills.


5.    EPCs and EICRs are not legally required for serviced accommodation properties.



These are the principal benefits but there are many more which are too numerous to mention.

So if you are a buy-to-let landlord how do you create a serviced accommodation business?  There are essentially two ways of doing this.


a.     You set up your own serviced accommodation business and incur all of the set-up costs yourself.  You train yourself, furnish it to serviced accommodation standards, pay all of the expenses, market the property to guests, employ the housekeepers, appoint an accountant etc.


b.    You outsource the serviced accommodation business to an existing serviced accommodation provider who manages it on your behalf as your agent in return for a commission.  You receive all of the revenue and incur all of the costs associated with your business but crucially you do not get involved in the day-to-day management of the business


Whichever route you take you will improve your cash flow and reduce your taxes.  

If you would like advice on how to create your own serviced accommodation business do get in touch with us.  You know it makes sense.

Tony Byrne

Managing Director


About the author

Tony Byrne

Managing Director

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