Tax on buy to let properties

The following information offers a guide to the taxes you may be subject to as a buy to let property investor. It is correct at the time of publishing (July 2017) but we recommend requesting professional advice before you make any decisions about investing in property or taking out a buy to let mortgage.

Property tax: Stamp duty
Stamp duty, also known as Stamp Duty Land Tax, must be paid within 30 days of the purchase of every property and is usually transferred by your solicitor on your behalf. The amount is worked out as a percentage of the value of the property and it applies to buy to let. The amount you pay in stamp duty increases if you already own a home and are investing in a second property. Any subsequent purchases will also be subject to the higher rate of tax.

Paying tax on your income
Although there are exceptions and various thresholds set by the government, everyone is subject to tax on money they earn, whether it’s through paid employment or being a landlord. This includes income from a buy to let property and the exact amount you are required to pay will depend on your individual financial circumstances.

You can either accept rental income as an individual directly into your personal bank account or as a business that you have set up. Whichever way you choose to manage your investment, there will be tax payable on the amount you earn. If you decide to declare the income you receive in a Self Assessment tax return, this will be charged based on your personal circumstances. This is calculated as follows: 20% for basic rate taxpayers, 40% for higher rate tax payers, and 45% for those who pay an additional rate). This information is correct at the time of publishing but we recommend you seek professional advice from a qualified accountant before making any decisions.

There are costs you will incur as a landlord that you can offset from your income as a landlord. Expenses such as some maintenance costs, new furnishings or fuel used to get you to the property can be deducted from your overall profit. However, it is important to remember each individual case is different and we recommend asking for professional financial advice from a qualified accountant prior to becoming a landlord or submitting any accounts to HMRC.

Capital gains tax
You’ll be liable for Capital Gains Tax if you make a profit on the sale of a property that’s not used as your residence, after deducting any eligible costs such as solicitor’s fees. This is because any additional property you may own or sell is deemed to be an asset from which you may profit.

There are a number of personal allowances when it comes to capital gains tax on property. For example, an annual allowance (at the time of publishing in July 2017) of £11,100 in capital gains will be tax free. Once the profit you make goes above the £11,100 threshold, tax of either 18% or 28% is payable, depending on how much money you gain.

It’s important to remember your Capital Gains Tax is the amount of profit you have made from selling a property, less some of the following legitimate tax-deductible expenses.

• Solicitor fees
• Estate agent fees
• Stamp duty
• The cost of advertising, for example on an online property portal

Asking for professional advice

The financial information in this guide has been compiled to the best of our knowledge at the time of writing. We recommend that you get advice from a reputable, qualified professional or accountant before proceeding with any property purchase or buy to let mortgage.

If you’d like to speak to one of the expert mortgage advisors at Private Wealth Mortgages, please click here for more details. Our friendly team will be happy to help and our team of professional, qualified brokers can present you with the most appropriate mortgage products for your personal circumstances.

In addition, we work with a number of trusted associates in other fields who may be able to give you guidance when it comes to purchasing a property as a buy to let. These include solicitors, accountants and tax specialists.


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Private Wealth Mortgages Ltd is authorised and regulated by the Financial Conduct Authority. FCA Number: 445980

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