T is for Tax | Taxation for U.K. Investment Properties | Tax Basics for Landlords
The type of tax and specific rates payable on income received from rents and proceeds of sale of residential investment property vary across the global markets, although broadly speaking all apply an income and capital gains tax, in addition to regional property taxes and charges.
Similarly, to the U.K. rental income from investment property in Berlin is subject to income tax, whilst properties will only incur capital gains tax on income realised within 10 years of the purchase. Investment assets may also be subject to a regional property tax and solidarity surcharge.
Taxation for U.K. investment properties
Any profit you make from renting out a property is part of your income, and as such, is subject to Income Tax, excluding any allowable expenses. The amount of tax you pay on this is subject to your total taxable income. If you pay the basic rate of tax then you’ll pay 20%, while if you’re a higher rate taxpayer, you’ll pay 40%, and if you’re in the additional rate bracket you’ll pay 45%.
Allowable expenses are things you need to spend money on in the day-to-day running of the property, such as letting agents’, accountants’ and legal fees, buildings and contents insurance, maintenance and repairs, ground rent and service charges, utility bills, services you pay for and other direct costs.
Completing your tax return
It is important that tax returns are completed accurately and within the specified time frames, which are different for paper and online returns.
It is always advisable to speak to a tax advisor or accountant with regards to the relevant tax rules.
Non-Resident Landlord Schemes
Overseas investors and non-U.K. resident landlords can subscribe to the Non-Resident Landlord Scheme with managing agents able to pay tax on your behalf.
Other taxes to be aware of with regards to the management, acquisition and disposal of assets in your U.K. property portfolio include Capital Gains Tax and Stamp Duty, with buy-to-let properties now subject to between a 3 – 15% stamp duty surcharge on purchases.
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