How can we reduce income tax if we buy-to-let?

Q My wife and I are planning to buy a buy-to-let property in the north-west. We are unsure about the implications for income tax from rents received. Is there any way that we can minimise our tax liabilities and benefit by:
· Choosing an interest-only mortgage over a capital repayment
· Directing income streams to the lower earner (my wife earns ?20,000pa and I earn ?32,000pa)
· Offsetting repairs etc against the rental income?

SD

A You seem to be on the right track. However, there are a few points worth mentioning. The rationale behind using an interest-only loan is that it is less expensive and you would only get tax relief on the interest part of the mortgage repayment, not on the capital. If you want to direct the income to your wife, she would have to be the sole owner of the property and her lower income might make it more difficult to get a mortgage. You can offset the cost of repairs against the rental income, but only if they are necessary to maintain the property and not for improvement.