Capital Gains Tax (CGT)
Basic tax payers are charged 18% CGT on buy to let second properties. Higher or additional rate tax payers are charged 28%. The basic-rate of CGT for other assets is 10%, and the higher-rate is 20%. You will pay CGT if you gain profit of £12,300 or more after selling your buy-to-let property.
There are a few ways in which you can lower your CGT bill by offsetting costs like Stamp Duty, solicitor and estate agent fees or losses made on a sale of a buy to let property in a previous tax year by deducting these from any capital gain.
It is a legal requirement to inform HMRC (His Majesty s Revenue & Customs) of any profit gained and you must pay your tax within 30 days.
Any income you receive from renting out property would be considered taxable income. You must declare your income on your Self-Assessment tax return for the tax year it was earned in.
Taxes will vary depending on where you are based, for example, the tax may be between 20% – 45% if you are in England, Wales, or Northern Ireland.
Mortgage Interest Tax Relief
Property owners were able to deduct mortgage interest from rental income to reduce the tax they pay, however, this is no longer an option. Property owners will now get a tax credit based on 20% of the interest of their mortgage payments. This means that property owners are likely to pay significantly more tax than before.
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