Buy to let - tax implications

You should always engage the services of a competent and qualified account or tax adviser in such matters. As a guide it is important to be aware that rental income is treated by HMRC as unearned income and must be declared.

The rental income achieved is treated as a gross payment, but there are various legitimate costs, mortgage interest and repairs for example, that can be applied to produce a net figure for taxation purposes.

There is always a longer term potential for a Capital Gains tax liability should you sell the property and make a profit. Your main residence can increase in value under current taxation laws without any liability for Capital Gains tax, but investment properties cannot.

The last and longest term tax consideration is with regard to a potential Inheritance Tax liability that could accrue if long term capital growth is achieved. Investment properties will be included within your estate for the purpose of any Inheritance Tax calculation upon your death.