A little look at what determines your tax bill.
As you might’ve already guessed, there are three factors affecting how the UK government taxes your investments:
If you choose to invest in your own name, rather than through a company, the UK government will lump any rental profits from your buy-to-let together with the rest of your income (such as your salary).
That means your buy-to-let income could bump you into a new Income Tax bracket (say, from the Basic rate of 20% up to the
Higher rate of 40%, or from Higher to the Additional 45% rate). Again, this is only relevant if you invest in your own name, rather than a company – more on this in a second.
This will affect how much SDLT you’ll pay when you first buy your property. Remember: in most cases, the UK government applies SDLT at the same rate regardless of how you buy your BTL property. That means you’ll generally pay the same whether you invest in your own name, or with a company.
As you’ll now know, how you invest has a big impact on how you’re taxed. For many people – especially Higher rate taxpayers – investing through a limited company can save you thousands on your tax bill.Let’s explore those tax benefits in more detail.
