Financial Advice

Investing our time to help you

Investing in buy to let property for the medium to long term is a tried and trusted method of securing your financial future, but it can be a complex area and you may have questions.

Here, we’ve outlined some of the common financial and tax issues facing investors and a brief explanation.

However if you would like more help or advice we have partnered with Mitchell and Co chartered accountants. They are buy to let specialists and can help ensure any investment you make is as tax efficient as possible. Furthermore as a North Fox client you will receive preferential rates when instructing them.

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Good to know

Capital Gains Tax

If you choose to sell your buy-to-let property, you will need to pay Capital Gains Tax (CGT) on any profit that takes you over your annual tax-free capital gains allowance, which is currently:

Tax Year 2022-23 2023-24
CGT allowance for an individual £12,300 £6,000
Couple’s allowance (married or in a civil partnership only) £24,600 £12,000

Basic-rate taxpayers pay 18% on any profits they make when selling a buy-to-let property. This rate is 28% for higher or additional-rate taxpayers.

You will only pay tax on the profit you make from the sale and not the amount you sell it for. You will also be able to offset many of the costs associated with the sale such as broker, agent and solicitors fees.

Good to know

Stamp Duty and Land Tax

From April 2016, buy-to-let and second home buyers in England and Wales have to pay an additional 3% on each stamp duty band.

What are the rules for non-UK residents from 1st April 2021?

On the 1 April 2021 a 2% stamp duty surcharge for overseas buyers purchasing residential property in England and Northern Ireland was introduced. This is in addition to the 3% charged to buy to let investors.

Buy-to-let and second home stamp duty tax bands

Band Standard Rate Buy to let or second home
Up to £250,000 0% 3%
The next £675,000 (the portion from £250,001 to £925,000) 5% 8%
The next £575,000 (the portion from £925,001 to £1.5 million) 10% 13%
The remaining amount (the portion above £1.5 million) 12% 15%

Source : HMRC

Please use our Stamp Duty

"How much stamp duty do I need to pay?"

You can use our calculator, which will help you detemine the total annual owed.

What is the purchase price of the property? Calculate
Good to know

Buy-to-let Mortgages

Buying a property with mortgage finance allows you to take advantage of the power of gearing. In simple terms this means you can make profits on money you have not personally invested. The mortgage market in the UK is currently improving significantly but still somewhat volatile, making expert help and advice more important than ever. We partner with Visionary Finance, an award winning mortgage specialist, who can help ensure you have the best advice and ultimately, the most cost effective finance solution in place.

So What are the benefits of buying with mortgage finance even at todays higher rates?

If we imagine for a moment two investors decide to buy two identical apartments in the same block for £100,000 each. Investor A puts down a 25% deposit and uses a bank loan for the balance, he has put £25,000 of his own capital into the deal. Investor B buys outright in cash and pays the £100,000 in full. If the properties were to rise in value by 50% over the next 10 years both investors would in simple terms have made £50,000 of capital growth. As Investor A only invested £25,000 of his own money his return is a huge 200%. Investor B has made a return of 50% over the same time period.

Gearing with mortgage finance, deciding on capital repayment or interest only and how to structure any investment are not always simple decisions. It is why we are here to discuss your options in more depth at a time that is convenient to you.

Good to know

Mortgage Interest Tax Relief

The tax relief that landlords of residential properties used to get for finance costs was restricted in 2017. This reduction is based on the basic rate of income which is currently 20%. This meant that if you were a basic rate tax payer things carried on much the same as before, however many higher rate tax payers ended up having to pay additional tax.

It is worth noting that this tax change did not and does not impact people who purchase via a limited company. The choice to invest in a personal name or via a limited company is something our partners at Mitchell and Co would be happy to talk you through.

Good to know

Income Tax

When you rent out your buy-to-let property to tenants, you will need to pay tax on the rental income. How much tax you pay will be based upon your tax band.

The total amount payable can be significantly reduced by offsetting allowable expenses such as letting agent fees, repairs etc.

Bands Taxable income Tax rate
Personal allowance Up to £12,570 0%
Basic rate £12,571 to £50,270 20%
Higher rate £50,271 to £125,140 40%
Additional rate over £125,140 45%
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