Selling a buy-to-let property: what are the tax implications?

16 07 2018

If a property isn’t your home or primary residence, there are several types of tax you need to be aware of. Miscalculate and you could receive a hefty, unexpected bill. Pay late and you might have to deal with fees or fines. Nobody wants to go through that. 

Here’s your guide to tax when you sell buy-to-let property:

Stamp Duty

You will need to pay stamp duty land tax within 30 days of buying a second property. The amount you pay depends on the cost of the property and where it is in the UK.  

These are the rates for England and Northern Ireland: 

  • 3% tax on the first £125,000
  • 5% on the portion up to £250,000
  • 8% on the portion up to £925,000
  • 13% on the portion up to £1.5 million
  • 15% on everything above that

Capital Gains Tax

If you sell a property for more than you paid for it, then you must pay capital gains tax. However, there is an annual allowance for individuals of £11,700 and for couples of £23,400. 

Basic rate taxpayers then pay 18% on anything they gain over that allowance. Higher rate taxpayers pay 28% on profits above the allowance. These are the rates for the 2018/19 tax year. 

If the property was your home, a business asset, or occupied by a dependent relative, then you may be eligible for tax relief. 

In some cases, you will need to work out your capital gain based on the market value of a property. This applies if the property was a gift, you owned it before April 1982, or you inherited it. 

There are also special rules if you lease or sell part of your land, or your property is compulsorily purchased.

Income Tax

You must also pay tax on any income you receive as rent. The amount of income tax you pay depends on the income tax band you fall into. 

Again, it’s possible to legitimately minimise the tax by deducting expenses, such as property repairs and maintenance and interest on buy-to-let mortgages.

Inheritance Tax

Solo landlords have to pay inheritance tax on buy-to-let property, if your property minus any outstanding mortgage is worth more than £325,000. 

For those who are married or in a civil partnership, you will pay inheritance tax if the value is over £650,000. The tax is 40% on value above these amounts. 

All in all, tax on selling buy-to-let property is a little complicated, but knowing the rules and regulations certainly helps. For further assistance, get in touch with us on 020 3936 5079 or send us an email at lettings@shawsestateagents.com. 

Category Property News • By Huw Jones16 July 2018

Tags: Property Tax

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Huw Jones

Huw Jones

Huw Jones has a wealth of property experience and expertise in the London market. This expertise includes both residential and commercial sales, new homes, investment brokering, lettings and property management.