Paying Tax On Buy To Let UK
Paying Tax on Buy to Let UK | Tax Facts for Property Investors
Paying tax on buy to let UK properties is one area that potential landlords have to consider carefully. In terms of paying tax on buy to let UK landlords should be aware of the taxes that affect them and their legal obligations. Rental income is taxed in the same way as other income, so the basic rate when paying tax on buy to let UK property is 22 per cent, with the higher rate at 40 per cent. However, there may be exemptions and tax relief when paying tax on buy to let UK purchases. We would recommend that you check out any tax issues with a tax expert as our advice is for guidance only.
One consideration when paying tax on buy to let UK property is stamp duty, which ranges from 1 per cent for properties between £175,000 and £250,000, to 4 per cent for properties over £500,000. There are some areas where property may be exempt from stamp duty, and this is worth considering for the BTL landlord. The list of exemptions is available from the Inland Revenue. The exemptions are for property in disadvantaged areas which is sold for less than £150,000. Buying and selling an off plant BTL property may also provide some exemptions from stamp duty.
When paying tax, landlords will be most interested in any deductions that are available. The good news is that there are several tax breaks available when paying tax on buy to let UK properties. For example, there is a wear and tear allowance available to landlords who let furnished BTL property. This is equivalent to 10 per cent of gross rents. An alternative is a renewals allowance to pay for the cost of renewing furnishings, though this may not be claimed in the first year of property ownership.
Buy To Let Tax Deductions
Another deduction that is available for landlords who are paying tax on buy to let UK property is for maintenance of the property. B2L landlords can claim for gardening, cleaning, decorating, painting, checking utility safety and other events that maintain the property. This tax relief is not available for improvements to the B2L property. Insurance on appliances can also be claimed as a deduction.
Other insurance that is deductible when paying tax on buy to let UK premises is landlord insurance, which protects the buildings, contents and landlord from any liability. Service charges and ground rent for flats may also be deductible. When paying tax, letting agents' fees may attract tax relief, as will accountants' and solicitors' fees and any other professional fees relating to the purchase and management of the property. This can include the cost of marketing the buy to let property.
Buy to let is a long term investment, but there will come a time when landlords will want to realise that investment, if only so they can buy another property. A key issue relating to paying tax on buy to let UK property is capital gains tax. This is a tax paid on the amount that the property has appreciated in value during the period of ownership. There may be some relief from this, especially if landlords have done a let to buy and the property they are selling was previously their main residence. There are also some exemptions if the property is for sale within three years of purchasing a rental property. However, buying a property solely for investment means that landlords will be liable for the full amount of Capital Gains Tax. This is an important consideration when paying tax on buy to let UK properties.
