The effective tax rate in many buy-to-let cases is over 70% when the effect of non-deductible expenses (in respect of which you end up paying tax on non-existent profits) is counted.don't forget taxation is +50% assuming you make any money
You seem based on your initial post to have questions that should have been addressed prior to purchasing a property for rental, it can be a tough business and if you don't mind me saying you appear to have done little research, rental of property is not for every one and must be done professionally to stand any chance of getting a couple of percent yield, don't forget taxation is +50% assuming you make any money, choose tenants carefully, don't assume as you may be that the letting agent is some kind of guru that will keep you right.
OP needs to give us some figures. We are working on basically nothing here. Purchase price, rental, renovations. Tax bracket etc.
I'm not understanding your point about the rent cap - versus taxation and mortgage?
What is the rent expected?
Not sure why you don't want to maximise your return. But anyway.
Cost 230K (plus legals)
Renovations 70 (I'm upping the 50 to this)
200K
Rent 18K - 1260 = 16740. Let's just take off another 1K in costs as it will be newly renovated. (house insurance, garden, repairs, possibly unfurnished) so you've 15740. Take off half in tax. Get about 8K into your pocket.
Please be aware that the Minister brought in some scheme for allowing expenditure up to 15K I think it is, in order to get properties currently unlet, up to standard. And it is my udnerstanding that even if this is 'capital in nature' is is allowable against rental income tax. Prior to this there was another scheme called the 'Countrywide Enhancement Scheme'. I used that one myself. But it had no limits.
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