purchase To Let Tax Information - How To Reduce Your Tax Bill

purchase Look great for the Summer with Medifast and get one week FREE! (Use code PROMO at checkout!) let tax information is often very hard to come by with structured settlement protection act required information scattered around various sources fro international conference call inland revenue, hearsay from friends or colleagues or dotted around various websites on the internet. Here we will try to cover the basics and hopefully give some pointers on how to minimise the tax bill from your sildenafil to let investment.

comprehend what you must pay.

There are two main obligations a purchase to let landlord has to the tax authorities in the UK (and indeed in most countries):

1. Capital Gains Tax

that is a tax on any gains in the capital value of your purchase to let property when you come to sell it. In other words if you purchase the purchase to let property discount Prozac 100,000 and sell it 5 years later for 150,000 then you would be liable to pay tax on the profit of 50,000. Following he recently announced changes to a capital gains tax rate of 18%, your tax bill following the sale of that property would be 9,000 (50,000 x 18%).

2. Income Tax

that is the tax you'll must pay on the rental income of your purchase to let pproperty. For example if you rent the property for 800 per month and the property is let out all year you would be liable to pay taxes on 9,600 (800 x 12months) income. If yo are a higher rate tax payer your tax bill would be 3,840 (9,600 x 40%). that obviously can affect the profitability of you purchase to let investment significantly so it is important to comprehend how to minimise that tax bill.

Your can offset expenses such as repairs and maintenance of the property again your income liability (9,600 in the example above). However the largest way to reduce your bill is by off settiing the interest on your purchase to let mortgage against the income. It is because purchase to let mortgage interest (not capital repayments) is tax deductible that the majority of landlords choose to finance their purchase to let investments using interest only loans.

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