Let-to-buy is the only option for many homeowners who have to get on with their lives as the housing market freezes up and leaves them unable to sell their home.

The strategy is straightforward - if you can't sell but have to move, let out your home and move on by buying or renting a new place to live.

Rental income from your tenant than pays the cost of the mortgage on the home you leave behind, while you dip in to your own income to pay for your new home.

So how does let-to-buy affect your tax?

You have to bear in mind two taxes - income tax on any rental profits and capital gains tax on any profit you may make on the eventual sale of your property.

Income Tax

As a landlord you must tell the taxman within three months of letting your property that you are receiving a new stream of income. Don't register as self-employed online, because as a landlord you are not self-employed.

Open up a charge free bank account at a building society to receive rental income and for paying out property expenses, like repairs.

You also need to consider safety certificates for gas appliances and the property's electrics plus the new landlord's energy certificates that rate the energy efficiency of your property.

In these tough financial times, think about protection insurance just in case your tenant can't or won't pay rent.

You also need to keep financial records of any money you receive and any payments you make on the letting property.

As a landlord, your first tax year runs from the date you start letting until the following April 5. You then fill in the rent received and expense details on the Land and Property section of your tax return for that tax year.

For example, if your first tax year ends on April 5, 2009, your first tax return is for the year 2008-09 and must be filed at the latest by January 31, 2010.

If you have made a profit, you pay income tax on the amount. If you have made a loss, you can carry the figure forward to set off against your first profits.

Remember, if you make a loss, you should still complete a tax return.

Capital Gains Tax

All the time you have lived in the property as your main home is exempt from capital gains tax (CGT) plus the last 36 months of ownership. You don't really have to worry about CGT until three years after you have moved out.

Hopefully in that time, the property market will have recovered to some extent and you can sell, content in your own mind that you have no CGT to pay.

If you sell after the last 36 months of ownership, a CGT relief called letting relief applies. Letting relief does not necessarily wipe out your capital gain, but will substantially reduce any amount owed.

When the chargeable gain on the property is calculated, don't forget if there are two or more owners, each is entitled to letting relief against their share of any gain, plus their personal CGT allowance for the year. For 2008-09, the CGT personal allowance is £9,600 per person and generally rises in line with inflation each year.

Your new home

If the property you move to is your new main home, then any gain in value while you are living there is also exempt from CGT under Private Residence relief (PRR) rules.