Real Estate Investor Magazine South Africa Real Estate Investor Magazine - July 2017 | Page 58

UK PROPERTY TAXES
SERIES PART 2
How to Minimise
Your Tax
The Pros and Cons of Property Tax in the Uk
BY GRAHAM BUSCH AND SONAL SHAH
Continuing our series on residential property-related
taxes, we’ll be dealing with Income Tax (or, in the
case of UK companies, Corporation Tax), Capital
Gains Tax, and Inheritance Tax.
Income Tax
In the case of individuals and trusts, Income Tax is
payable on rent receivable less allowable expenses.
• Currently, the rates are 20%/40%/45% for
individuals. This rate depends on their total;
income and gains in the relevant tax year.
• Trusts pay Income Tax at a rate of 45%.
Allowable expenses in the case of tax deductions include:
mortgage interest, repairs, utility bills not borne by tenants,
letting and management fees, the replacement cost of movable
furniture and furnishings (initial cost is not allowed), as well as
replacing damaged household appliances.
Capital Gains Tax (CGT )
When looking at CGT, it can be broken up into three
groups: Individuals, trusts, and companies.
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JULY 2017 SA Real Estate Investor
CORPORATION TAX
UK-based companies pay Corporation Tax based on their net
rents. Currently, the Corporation Tax rate is 19%, but is due to
fall to 17% in April 2020. Deductions are similar to those laid out
for Income Tax, apart from the fact that there is no restriction
on allowable interest. As a result, many landlords incorporate
ahead of a buy-to-let purchase.
Individuals
• For individuals, CGT is payable on chargeable
gains after deducting from the selling price, the
original purchase price, related acquisition costs,
improvements and selling costs.
• If the individual’s total income and gains are
within the 20% tax band, the CGT rate is 18%.
• In cases where income and gains exceed the 20%
band, the rate is 28%.
• An annual exempt amount of £11,300 per taxpayer
(£22,600 for joint ownership) is currently available
to claim against total net gains (thus, gains less
losses) per UK tax year.
• Principal private residence relief is also available
where the property concerned was the main home
of the individual.
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