Directly buying a property can transform your financial situation, and give you returns for potentially years to come. Whether you’re purchasing so that you can live in it yourself as a second home, buying a holiday house that you let some of the year, or getting involved in a buy-to-let scheme, property is a stable and secure way to invest your money.

As an independent owner, you have to pay 45% tax on all income you get from the property. Compared with other investment types, property offers particularly great tax benefits, and there are several loopholes that first time investors should know about too.

Besides generating income from renting out or selling a house, there are various tax benefits to consider when getting involved in the property market – here are the main three:

1. Deduct Expenses

If you’re in charge of a residential property, there are certain expenses that can be deducted from all your profits generated by the house (from selling or renting it out). The included expenses include any fees paid to the letting agent or accountants, legal expenses, insurance, utilities and Council Tax. The full list of what counts as an expense can be found on the direct gov page on renting out a property.

2. Dual Ownership

If you’re the owner of a rental property, you’re entitled to up to £1000 tax-free allowance on income from rentals. If you own a property with someone else, you are both entitled to this £1000 allowance, which can save you an average of £300 in tax payments. If you’re considering property investment, finding someone reliable to invest jointly is a good move.

3. Hold Property Under a Ltd Company

You’re entitled to up to £11,850 tax-free personal allowance from rental profits. If you’re an individual, you’ll have to pay the full 45% tax (not to mention additional taxes in the form of Stamp Duty, Land and Buildings Transaction and Land Transaction taxes); if you purchase a property through a Limited company, you could end up paying less tax. If you’re a landlord who has four or more properties to let out, you will likely save money by purchasing through a ltd. company, but there are other factors to consider such as time spent doing business admin.

Doing plenty of research into property-related taxes could save your hundreds of pounds. Make sure you correctly deduct all your expenses before calculating your profit from rental, so as not to accidentally file for too high a rental income tax return.

Consider buying a property with another person to maximise your tax-free allowance (and share the financial responsibilities in general), through the benefits of joint ownership laws.

And finally, if you’re serious about cutting your taxes and are in charge of four or more properties, setting up your own limited company could be the best way to do that.

Whatever your decision regarding property and taxes, you can get all the assistance you need with the help of a professional property investment company. Get in touch today to arrange a consultation.