Investment Property Accountants - WARR & CO

Investment Property Accountants

Property Investment - A Taxing Thought

If you are considering purchasing a property for investment purposes, you should only do so once you are fully aware of the tax implications.

Property is an attractive asset class as there is the prospect for a dual return. A property investor hopes to enjoy both an ongoing income and also an increase in the capital value of the acquisition. In simple terms, there are two types of profit that a successful property investor seeks to make, a rental profit and a capital gain.

To start with, when calculating profit from rents, one should be clear that it is rental income deemed due within the tax year, not necessarily rents received, that is subject to tax. Of course, it is not simply a case of the rents themselves being taxed, as there are a number of costs, which are allowed to be offset against the rental income before the profit is calculated.

Equally, when calculating the profit upon disposal of a property, similarly there are various deductions, which may be made.

It is fair to say that when investing into property, a cost which an investor incurs will be allowed to be deducted against either rents or the sale proceeds, not both. Whilst not an exhaustive list, we have taken the opportunity to list below some of the most common costs that an investor may incur and how these are treated: -

Allowable against rents

Building & contents insurance

Cost of advertising the property for let

Managing agents fees

Interest on any loans effected to purchase the property

Service charges for common areas
Mileage for inspection visits
Wear & tear allowance (where applicable)
HIPS EPC costs
Essential repairs and maintenance
Tenancy scheme deposit charges
Early repayment charge on a mortgage where this is incurred


Allowable upon disposal

Cost of purchase including solicitor costs, search fees and Stamp Duty

Renovation and improvement costs

Costs incurred whilst the property is not available for letting

Costs of sale including solicitor costs and estate agent fees

Where you are unsure of the specific tax treatment of a cost being incurred, please contact us for advice in the matter.

Where an investor enjoys sole ownership of a property or via a partnership, the rental profit is ultimately assessable against Income Tax whilst the profit from a disposal of a property is assessable against Capital Gains Tax (CGT). Where a property is owned by a Limited Company, both rental profits and capital gains are assessable for Corporation Tax.

Note that where properties are being let on a furnished basis, there are additional rules to take into account.

Date of Article: 14th October 2008

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This domain is owned by Warr & Co Charted Accountants which is a member of the Institute of Chartered Accountants in England & Wales (ICAEW). Whilst the information detailed here is updated regularly to ensure it remains factually correct, it does not in any way constitute specific advice and no responsibility shall be accepted for any actions taken directly as a consequence of reading it. If you would like to discuss any of the points raised and / or engage our services in providing advice specific to your personal circumstances, please feel free to contact Peter Edwards on 0161 477 6789 or email us at