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What are taxes associated with purchasing and selling a property?

Buying a property in Cumbria can be an exciting and rewarding experience. Cumbria is an area of great natural beauty, with stunning landscapes and various activities to enjoy. When buying a property in Cumbria, it is important to research the area thoroughly. Consider the local amenities, transport links, and the potential for property price growth. Choosing a location that suits your lifestyle and budget is also important. Speak to local estate agents and property experts to better understand the area. It is important to understand the legal process when it comes to the actual purchase. Ensure that all documents are in order and that you know of any restrictions or obligations. Ensure you know the costs associated with buying a property, such as stamp duty and legal fees.

You can get professional help from Estate Agents in North Cumbria if you look forward to buying a property. Investing in Cumbria, UK property, is an attractive option for many investors. However, it is important to understand the various tax factors that may apply to such investments. This blog will cover some of the most important tax considerations to remember when investing in property in Cumbria, UK. We will look at stamp duty, capital gains, inheritance, and value-added tax (VAT). 

If you are thinking of investing in real estate in the United Kingdom soon, it is imperative to delve into the economic effects before making any decisions, particularly the taxes that must be paid.You can always get professional help from estate agents in North Cumbria. Here are five of the main taxes to keep in mind:

Stamp Duty Land Tax (SDLT)

When purchasing a property or land, SDLT must be paid to HMRC within 30 days. The rate is based on the property’s value, beginning at 0% for those under £125,000, with a 12% rate for those over £1.5 million. If you buy a second property in England, you will be subject to an additional 3% surcharge on the total purchase price.

Capital Gains 

Capital Gains Tax is a levy on the profits you make when you dispose of something that has increased in value since you acquired it. Similarly to the individual allowance for income, there is a tax-free yearly exemption for the 2019/2020 tax year, which has been raised from £11,700 to £12,000. Capital gains from the sale of residential properties will be subjected to either 18% or 28% tax, depending on whether the gain falls inside the basic or higher tax bands.

Income Tax 

The rental income you receive from your property is taxable and must be reported in your Self Assessment Tax Return. Your income tax bracket decides this tax liability. However, certain expenses related to the property can be deducted from your rental income, for example, repairs and maintenance, council tax, agency fees, and building insurance premiums. Tax relief is also available on loan interest payments to buy investment properties. However, this relief is limited to basic rate tax relief and is not treated like other deductible expenses.

Inheritance Tax 

Owning a buy-to-let property will be part of your estate and may be subject to Inheritance Tax. If you are the sole owner of the property, Inheritance Tax will be applied if the value of your estate, including the property, exceeds £325,000 after deducting any mortgage. If you own the property with your spouse or civil partner, the threshold of your combined estate is increased to £650,000. Any value over this threshold will be taxed at 40%.

Annual Tax on Enveloped Dwellings

The ATED charge is an annual tax that applies mainly to businesses possessing residential buildings in the UK with a value of more than £500,000. When it came into effect in 2013, it applied to buildings with a value of over £2 million but has since been changed to include more properties. Companies with a beneficial interest in the property, partnerships where one or more partners are a company, and Collective Investment schemes may all be liable for the tax. There are some exemptions from the tax, such as if the property is rented out, but even if the property is exempt, an ATED return must be submitted yearly. 

Wrapping Up 

It is important to consider the various tax factors when investing in property. From researching the investment opportunities, understanding the tax implications of the investment, and planning for the future, investors should consider the different tax regulations to ensure they are making the best decision for their investment. Additionally, investors should seek the help of a tax professional to ensure they comply and take advantage of any potential tax savings.

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