The current rules regarding taxation are complex and liable to change. It is advisable that you seek professional advice on this aspect from the Inland Revenue or with a professional accountant to verify the position with regards your own tax situation. The information below is a brief description of the current taxation situation with regard to buy to let property, it does not constitute advice and Independent Mortgages Online UK Ltd takes cannot be held responsible for any action taken as a result of the content.

Single or Joint Ownership

If you put a property into joint ownership then the tax liability is shared. There are increased tax benefits if one of the partners is a non taxpayer.

You will have to pay income tax on the net profits you make from the rental income at your highest rate of income tax. If you are currently a higher rate income tax payer then the profits you make from letting will be taxed at the higher rate.

If the property is in joint ownership then the tax liability is shared.

The regular rental income you receive is your gross income. You can deduct from this figure, various expenses to arrive at a figure for net profit. The largest of these expenses is likely to be the interest payments on your mortgage.

In determining whether an expense is allowable, the Inland Revenue say it should be wholly and exclusively used for the purposes of the rental business. For example, repairs, redecoration, cleaning, gardening and insurance can be used.

You should keep consistent records of income and expenditure. You will need these in order to prepare accounts for the Inland Revenue. 

When you come to sell your investment property the profit (or gain) you make may be subject to capital gains tax.

Please note that capital gains tax is not payable on any profit you make from the sale of your own residential property. If a property has been used both as home and as a let property then profits are split according to the time spent in either use. There are however exemptions that may apply and it is important to take professional advice either from the Inland Revenue or a qualified accountant in respect of this.

The information above is a brief description of the current taxation situation with regard to buy to let property, it does not constitute advice and Independent Mortgages Online UK Ltd takes no responsibility for any action taken as a result of the content.

More Buy to Let information:

Buy to Let Mortgages
Legal Issues Facing a Landlord