TaxPersonal TaxTax Q&A: Buying property to let

Tax Q&A: Buying property to let

The tax implications of buying a property to let.

The property will be subject to stamp duty at normal rates – 1% for properties over £60,000, 3% for those over £250,000 and 4% for those over £500,000.

Net income from a property purchased as an investment will be charged to income tax under Schedule A. Receipts and expenses of the rental business are recognised on the earnings basis and are computed as if the letting was a trade taxable under Schedule D Case I. Interest on loans taken out to fund such property purchased is deductible. Expenses must be incurred wholly and exclusively for business purposes and must not be capital in nature. A recent development that the Revenue accepts replacing widows with double glazed units is deductible.

Provided the letting is in the nature of an in investment rather than a business activity, the income should not be subject to national insurance contributions.

Any gain on the sale of the property will be subject to capital gains tax but the generous principal private residence relief will not be available.

Any gain will be reduced by taper relief but only the less advantageous rates which apply to non-business assets.

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