If you’re considering purchasing a buy-to-let property and you’ve done your research you’ll know that there will be a number of associated costs.
One such cost that you may not have considered is taxation, but unfortunately for potential landlords, buy-to-let investments attract several different taxes.
Stamp Duty must be paid on all purchased properties valued over £125,000 – you can work out how much Stamp Duty you’ll need to pay using the Stamp Duty Calculator.
Rental income will need to be declared on a self-assessment tax return and you’ll pay Income Tax on this (how much you pay will depend on which tax bracket you fall into). However you will be able to deduct certain costs first such as letting agency fees.
Capital Gains Tax
If you sell your investment property, you’ll be expected to pay Capital Gains Tax – this is charged at two rates depending whether you are a basic rate taxpayer or you pay the higher rate of tax. You won’t be charged on the full amount you make as everyone has a tax-free allowance that is taken into consideration.
A buy-to-let property will form part of your estate upon your death, so it will be liable for Inheritance Tax.
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