Tax can be tricky.

While it’s important to pay what you need to, it makes no sense to pay more than that. And, in fact, your tax liability can be the difference between profit and loss for your investment. So, quite literally, it pays to be tax-efficient. That’s why we’ve written this handy series – to help you learn easily, invest confidently, and finally feel tax-triumphant.

How you’ll be taxed, and why.

As you might’ve already guessed, there are three factors affecting how the UK government taxes your investments:

1. Your income

If you choose to invest in your own name, rather than through a company, the UK government will lump any profits you make through your buy-to-let investment together with the rest of your income (such as your salary).

That means your buy-to-let income could bump you into a new Income Tax bracket (say, from the Basic rate of 20% up to the Higher rate of 40%, or from Higher to the Additional 45% rate). Again, this is only relevant if you invest in your own name, rather than a company – more on this in a second.

2. Your property's value

This will affect how much SDLT you’ll pay when you first buy your property. Remember: in most cases, the UK government applies SDLT at the same rate regardless of how you buy your BTL property. That means you’ll generally pay the same whether you invest in your own name, or with a company.

Find out how much you would have to pay using our SDLT calculator here. 

3. How you invest (company vs. personal name)

This will affect how much SDLT you’ll pay when you first buy your property. Remember: in most cases, the UK government applies SDLT at the same rate regardless of how you buy your BTL property. That means you’ll generally pay the same whether you invest in your own name, or with a company.

See the differences in detail using our company vs. personal name calculator here. 

As you’ll now know, how you invest has a big impact on how you’re taxed. For many people – especially Higher rate taxpayers – investing through a limited company can save you thousands on your tax bill.

To get a free personal consultation on your buy-to-let investment journey, book a meeting with one of our experts here.