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buy to let tax

With buy to let property investment considered a kind of business deal, there are a few different types of tax that are associated with it. From capital gains and income to stamp duty and tax relief, understanding tax on buy to let is integral to making the most out of your investment. Get clued up on all things tax so that you’re prepared and ahead of the game through every step of your property venture. Please take into consideration that all the taxes discussed below can be declared to HMRC in your self-assessment tax return.

buy to let tax

5 Key Buy To Let Points

  1. Tax on Buy to Let Income
  2. Capital Gains Tax on Buy to Let
  3. Tax Relief on Buy to Let Mortgage
  4. Buy to Let Stamp Duty Rates
  5. Stamp Duty Rates 2017/2018
  1. Tax on Buy to Let Income
  2. Capital Gains Tax on Buy to Let
  3. Tax Relief on Buy to Let Mortgages

4. Buy to Let Stamp Duty Rates

5. Stamp Duty Rates 2017/2018

Tax on Buy to Let Income

Buy to let income is the rent that you receive on the property, and this rent is subject to tax. The amount of income tax you pay is in accordance with your income tax banding. For example, basic rate taxpayers pay 20% income tax, whereas higher rate taxpayers pay 40% or 45% for additional rate.

tax on buy to let income

Tax on Buy to Let Income

Buy to let income is the rent that you receive on the property, and this rent is subject to tax. The amount of income tax you pay is in accordance with your income tax banding. For example, basic rate taxpayers pay 20% income tax, whereas higher rate taxpayers pay 40% or 45% for additional rate.

Capital Gains Tax on Buy to Let

When you come to sell your property, if you make a profit you will be liable to pay capital gains tax. Everyone is entitled to a capital gains allowance of £11,300, which means that you do not have to pay capital gains tax until you make a profit above this amount. The tax that you do pay is usually calculated at 18% or 28% of the profit.

capital gains tax on buy to let

Capital Gains Tax on Buy to Let

When you come to sell your property, if you make a profit you will be liable to pay capital gains tax. Everyone is entitled to a capital gains allowance of £11,300, which means that you do not have to pay capital gains tax until you make a profit above this amount. The tax that you do pay is usually calculated at 18% or 28% of the profit.

Tax Relief on Buy to Let Mortgages

Tax relief on buy to let is currently undergoing massive changes, with landlords previously only paying tax on NET rental income before interest and mortgage expenses. Nevertheless, a relief reduction will be in full flow by 2020, when landlords will have to pay tax on the full amount of rental income. Tax relief will be at a flat rate of 20% for all landlords.

Tax Relief on Buy to Let Mortgages

Tax relief on buy to let is currently undergoing massive changes, with landlords previously only paying tax on NET rental income before interest and mortgage expenses. Nevertheless, a relief reduction will be in full flow by 2020, when landlords will have to pay tax on the full amount of rental income. Tax relief will be at a flat rate of 20% for all landlords.

Buy to Let Stamp Duty Rates

Stamp Duty Land Tax is paid when buying property or an area of land in England, Northern Ireland and Wales. Please note that a separate Land and Buildings Transaction Tax exists in Scotland. The general rule is that you must only pay stamp duty when the purchase price of a property or piece of land exceeds a certain amount. For residential properties, this is up to £125,000. For land and non-residential properties, the threshold is £150,000.

Buy to Let Stamp Duty Rates

Stamp Duty Land Tax is paid when buying property or an area of land in England, Northern Ireland and Wales. Please note that a separate Land and Buildings Transaction Tax exists in Scotland. The general rule is that you must only pay stamp duty when the purchase price of a property or piece of land exceeds a certain amount. For residential properties, this is up to £125,000. For land and non-residential properties, the threshold is £150,000

However, investors tend to have already purchased a home for themselves, and may even have other existing buy to let properties. This means that instead of paying the standard stamp duty rates, UK landlords fall into the higher tier of stamp duty tax. This is an extra 3% on top of the typical rate that applies when only owning 1 home.

However, investors tend to have already purchased a home for themselves, and may even have other existing buy to let properties. This means that instead of paying the standard stamp duty rates, UK landlords fall into the higher tier of stamp duty tax. This is an extra 3% on top of the typical rate that applies when only owning 1 home.

Stamp Duty Rates 2017/2018

There has been a lot of movement on stamp duty rates over the past few years. When you own more than 1 property, the new stamp duty rates are as follows:

Stamp Duty Rates 2017/2018

There has been a lot of movement on stamp duty rates over the past few years. When you own more than 1 property, the new stamp duty rates are as follows

Property Price

Anything Under £40,000
£40,000 > £125,000
£125,000.1 > £250,000
£250,000.1 > £925,000
£925,000.1 > £1.5m
£1,500,000+

Percentage Stamp Duty Paid

0%
3%
5%
8%
13%
15%

To pay stamp duty on buy to let property, you can send a stamp duty land tax return to HMRC and pay within 30 days of completion.

Always be sure to take a fresh look at the latest stamp duty rates before buying your next property as the existing charges are subject to change.

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