Tax on Rental Income
The ownership of an investment property will determine how it is taxed, i.e. whether the property is held as an individual, jointly with another, or through a company.
An individual landlord will pay income tax on the net income from the property. This is the sum of the rents received less deductible costs, which would usually include repairs and management fees.
Interest paid on loans used either to finance the property purchase or for improvements or repair is treated as a deductible expense, as will be any arrangement fee or finance charge, for Income Tax purposes.
Property income subject to Income Tax does not include any profit made on disposal and does not take into account the costs of buying, selling or improving a property.
There can be advantages if a property is held in joint names by a married couple or civil partners, providing a useful income stream perhaps for a partner with little or no other taxable income. Tax free allowances and lower tax rates may apply.