Can I Save Tax By Investing in Property?

The simple answer to this question is yes, theoretically you can save tax by investing in property, but you can't learn how from a property investment guide. This is because the parameters involved are so vast and varied, and dependent on so many variables independent to the investor that no one could cover all circumstances in one guide.

You can save money on tax by investing in property using certain property investment vehicles, and by buying certain types of property (environmentally friendly property is a current example), but what one investor saves tax on another won't depending on the individual's tax status and situation, local and cross-border legal issues, and the idiosyncrasies of ever-changing double taxation treaties. Working tax savings into a property investment strategy must be researched by the individual, and one should almost always seek advice from a specialist adviser or accountant.

One example of a strategy for investing in property that can save tax for many is to form a company in the country where you are buying, and buy property through the company.

For example a quick delve into the world of advice on property investment in the UK, will reveal that a UK property investor will pay heavy taxes through income tax and capital gains tax, but if he starts a company and uses it to hold the properties then the taxes are corporations tax and dividends tax. This is a saving of up to 47% in some cases.

In the UK the first £10,000 in profits made by a limited company is tax free. If a private investor made £9000 profit in rental income from their properties, they would pay £3,600 in tax as a higher rate payer. If they opened a limited company and used it to hold the properties the £9000 would be tax free profit.

UK companies pay less tax in general than individuals. As a higher rate taxpayer (property investment will usually make you so), you pay 40% on your profit and gains. For a limited company, the tax rates are between 0% and 30%, a considerable saving!

However, navigating tax issues is pretty easy for an individual, but when you start operating a company it becomes a whole lot harder, and if you don't get it just right you will do the opposite of saving tax. Seek property investment advice to invest in property, but seek specialist advice on tax if you intend to use property investment as a way of maximising your tax savings.

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*This page is provided for information purposes only and should not be construed as offering advice. Flex Profit Hub is not licensed to give financial advice and all information provided by Flex Profit Hub regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.