What are the tax implications of owning (buy to let) investment property?
There have been two big changes in the last few years
First, section 24 of the 2015 Finance Bill restricts the amount of mortgage interest a property investor or second home owner can off-set against rent, phasing off-setting out so that after 2020 we won’t be able to off-set any mortgage interest.
The second big tax change is that after 2016 a 3% surcharge was added to the Stamp Duty payable by a property investor (buying residential property) or second home owner.
The effects of Section 24 are too involved to go into now, and you really need to talk to your accountant. But it seems that many property investors/landlords will find themselves being pushed into a higher tax band, and will end up paying pro rata much more tax than just that due on the rent.
In effect landlords/investors will be taxed on turnover and not profit, and property investing will be the only business treated this way.
The way around it, it seems, as discussed in an earlier video, is to buy your buy to let property investments into a limited company.
if you already own property in your own name you should probably (subject to your accountants advice) move them into a limited company – there are ways of doing this without generating Capital Gains tax or Stamp Duty on what is treated as a deemed disposal.
Here’s to successful property investing
Peter Jones B.Sc FRICS
Chartered Surveyor, author and property investor
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