Skip Navigation Links. Buy-to-let tax implications

What are the tax implication with a buy-to-let property?

When investing in a buy-to-let property, there will be a number of things for you to consider, one of which being how owning another asset will affect your taxes.

There are many tax implications that come with being the proprietor of a rental property, so it is worth taking this into account when you enter figures into our buy-to-let mortgage calculator. It will help you to work out the value of property you can afford and how much you need to receive as rental income.

At Landlord Centre, you can enter your details into our online buy-to-let mortgage finder, which will help you receive an instant quote on a loan depending on your deposit and the amount of money you expect to receive every month to ensure you can cover repayments on your mortgage.

Once you have calculated what you can borrow and what profit you will be able to gain from the property, don't forget to give careful consideration to your taxes.

Buy-to-let property taxes - the details

There are a number of different duties you will have to pay when you take out a buy-to-let mortgage, with stamp duty being the first to consider when purchasing a rental property.

This levy is imposed on properties worth more than £125,000, with a 1% tax being charged on homes up to the worth of £250,000, 3% up to £500,000, 4% up to £1,000,000, 5% up to £2,000,000 and 7% on properties over £2,000,000 (2014-2015).

Income tax is another duty to pay attention to, as this is a levy charged on your rental income. You will need to declare your profits on a tax return every year and it works in the same way as any earnings you receive during the 12-month period.

Therefore, you will be allowed a personal allowance of £10,000, and any rent you receive over the year that adds up to more than this will be taxed in accordance with your income tax banding - 20% for basic rate taxpayers, 40% for high rate and 45% for additional rate (2014-2015).

While Capital Gains Tax (CGT) won't affect results given by our buy-to-let mortgage calculator, it is still worth considering as you will be required to pay CGT if you sell your buy-to-let property at a profit. Since April 2008, CGT has been charged at 18% on any gains over the annual personal threshold of £11,000 (2014-15).

How to reduce your payments

While these taxes may make it seem as though costs will add up fast, there are ways you can reduce the amount of money you have to spend.

One is being able to offset mortgage interest payments on your buy-to-let property, as well as other expenses such as agency fees, maintenance charges and refurbishment costs, against your overall income.

Other things you can deduct from your taxable profits include insurance fees, advertising expenses and repairs you have to perform on the home.

By taking these costs off the amount of money you earn per year, you will be able to reduce the total income tax you will have to pay. It is important to discuss these issues with a qualified accountant.

Let Landlord Centre help you with your finances

There are a number of financial considerations you need to think about before investing in a buy-to-let property.

By using our website, you can find a wide selection of buy-to-let mortgage quotes, which will give you a good idea of what products are available.

If there is something you're not sure of, you can check out our FAQ, where common questions are answered.

You can also discuss your options with one of our team, who are always at hand to help you decide which buy-to-let mortgage product will suit you and your finances best.

Why not call Landlord Centre today on 0292 069 1010 or request a call back  from our website and you can find the best mortgage options for your finances?