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Bestinvest advises buy-to-let market

Investors in property through buy-to-let must keep a close eye on their tax situation, a manager at independent financial advisors Bestinvest said yesterday.

Peter O'Donovan pointed out that people should take out the biggest mortgage possible in order to avoid excessive tax payments.

This means that buy-to-let investors should seek out the lowest deposit home loans on the market - despite the credit crunch resulting in the most generous deals being taken off sale.

Currently, the average lender offers an 85 per cent maximum mortgage - and requires that rental income exceeds 120 per cent of mortgage payments.

Mr O'Donovan said: "[Investors] can then offset the mortgage payments and just pay tax on the profit they make, so obviously the higher the mortgage payment and the closer to the rental income, the less tax they pay.

"So hopefully someone else will be paying their mortgage and they'll be paying less tax, and in the meantime the property value hopefully increases."

Figures from the Council of Mortgage Lenders for 2007, released earlier this week, show that buy-to-let loan lending totalled £45.3 billion for the year.

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