Property investment and tax
Don’t let yourself be caught out with any false tax benefits when looking at property for sale. There are benefits linked with having a second property, but we look at some of the more technical details and explain why you should always make use of professional assistance.
Renting property as a tax benefit might be more involved than you may think, so it is advisable to make use of a professional consultant in order to ensure that things are done by the book after you have secured property for sale. If you decide to purchase property and receive an income from renting it out, then that income will be taxed, this would apply to these various situations:
- holiday homes
- bed-and-breakfast establishments
- guesthouses
- sub-renting part of your house e.g. a room or a garden flat
- dwelling houses
- similar residential dwellings
A deposit received from a tenant will be considered non- taxable, allowing that it has been kept in a separate trust account. This amount should not be used and in the event that the tenant would forfeit the deposit, it will then be considered a taxable income.
This taxable income might decrease due to any expenses experienced while the property was let. All the cost incurred while letting out the property will be allowed to be claimed, while any private expenses will not be able to be claimed back.
There are certain expenses that will be allowed to be claimed back, such as maintenance and repairs. These are very different costs to that of home improvement. Home improvement is considered a capital expense, this expense is included in the cost of the property.
You might find yourself in the situation where your expenses exceed that of your rental income, in this instance, the loss should be available to be off-set against other income earned by the homeowner.
If your aim is to benefit from being able to deduct tax from your property purchase then it would be highly advisable to seek the service of a tax consultant.
