Buying a second or holiday home can prove far more costly than planned if purchasers don't organise their tax affairs properly, Simon Littlejohns, tax partner at accountants and business advisers PKF in Birmingham, has warned.
He said many had failed to appreciate the tax implications of owning them, particularly when they are overseas.
"Whether it is a buy-to-let property or that dream holiday home, it could be subject to three different kinds of tax - income tax, capital gains tax and inheritance tax.
The idea of a substantial income from second properties, whether through the obvious buy-to-let route, or letting out the holiday home, is always one of the biggest attractions in buying a second property. But this is fraught with dangers. Rental income will be taxable in the UK, however it may also be taxed in the country in which the property is located resulting in foreign tax returns to be filled in and lodged.
"Married couples should consider putting the property in the name of the lower taxpaying spouse, or if it is in joint names electing for the income to be received by the lower tax-paying spouse so that less income tax is payable overall," said Mr Littlejohns.
As soon as someone owns a second property it is potentially subject to capital gains tax on a future sale.
If properties, or any assets for that matter, are sold, given to other members of the family, or transferred into trusts or companies, CGT will be payable on any rise in the value of the asset.
Again, like income tax, CGT is payable on foreign properties, too, even if the property is sold and the money is not transferred back to the UK. Mr Littlejohns said: "You can make substantial CGT savings through the use of trusts and gifts between husbands and wives before a sale was made."