|
Strategy |
Description |
Income Tax |
Capital Gains Tax (CGT) |
|
Buy-to-let |
Probably the most popular investment method and a strategy for long-term investment.
Income tax will be due on the annual rental profits and CGT due when the property is disposed of.
|
Yes
|
Yes |
|
Develop & Sell |
This is typically classed as a short-term (i.e. 3-6 months) investment and only Income Tax is due if you are trading in properties in this way.
All property development related expenditures can be offset against the final selling price.
|
Yes |
No |
|
Develop & Rent |
Another typical long-term investment, where the property is developed and then rented out.
All expenditures made developing the property can be offset when the property is disposed.
However rental profit will be subject to annual income tax. |
Yes |
Yes |
|
Buy & Sell |
If your are a master or want to become a master of buying undervalued property and then re-selling at a higher price then you will be classed as a property trader and will typically be subject to Income Tax only.
|
Yes |
No |
|
Buy-let-live |
A good investment strategy to make use of some very significant tax breaks if you are sitting on large capital gains.
This strategy only really applies to investors who intent to hold only a small number of properties during their life-time i.e. (3-6 properties).
Again income tax will be due on rental profits and CGT when the property is disposed of. |
Yes |
Yes
(but is dramatically be reduced) |
|
Buy-live-let |
Probably the most tax efficient way to avoid capital gains tax for the small investor.
This increasingly popular involves letting your previous main residence when buying a new home or moving abroad.
Again income tax will be due on rental profits and CGT when the property is disposed of. |
Yes |
Yes
(but is dramatically be reduced) |
|
Rent-a-Room |
If you decide to rent-a-room that is part of your main residence then you can receive an annual rental income, to the value of £4,250 and not have any income tax liability.
Ay income above this amount will be subject to income tax.
CGT is not due if you sell your main residence which has been classed your only home during the whole period of ownership.
Please Note: If the tenants renting the property do not live together with the family, then there can be CGT on that part of the house rented. |
Yes
(if claiming rent-a-room relief and income is greater than £4,250)
|
No (if tenants live with the family owning the property) |
|
Furnished Holiday Lets |
If you let a furnished property as a holiday let, then you will be subject to income tax on any rental profits.
There are number of very generous tax breaks available for those investing in Furnished Holiday Lets.
|
Yes |
Yes |
