There are a number of taxes you should be aware of when purchasing a buy to let property, from stamp duty to capital gains tax.
If you’re investing in UK real estate, you’ll be subject to stamp duty levies, which vary depending on the cost of the property.
Another form of levy you can expect to pay is capital gains tax, which is owed when you sell the house or flat and you make a profit on the asset. Capital gains tax is either 18% or 28% on the profit of the transaction, but is not applicable if you make a loss on the sale.
Before you calculate the profit you will owe tax on, be sure to take off solicitors’ fees, estate agent’s fees, advertising costs and stamp duty.
There’s an annual tax-free allowance for capital gains tax of £10,600, so you are only charged on any profit that exceeds this.
As you will also be earning an income on your property, you will also be charged income tax. You will have to pay 20% on earnings up to £32,010, 40% on between £32,011 and £150,000 and 45% on more than this amount. However, it is important to note, you will be exempt from paying income levies on the first £9,440 you receive in the year 2013-14.