Tax on income used to buy property to rent out?
I am working full time and also running a small business. I have a property that I rent out.
If I put £10,000 of my business income towards the mortgage of the property I rent out, would I still have to pay income tax on this £10,000?
Or if I buy a partnership in another business with this money, would I still need to pay income Tax on it?
My business has very small capital, so there is enough capital allowance I can claim. Would the investment in the new Business can be claimed as capital allowance and not taxable?
I might not have made my question clear enough.
The business I am reffering to is not the rental business. Business is selling products. I understand I need to pay tax on the profit from this business.
BUT if this income is reinvested in another business (a rental property) or partnership in another business, do I still have to pay tax on this money, that is not reinvested?
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Tags: Business Income, Business Partnership, Rental Property
rent property | , 8 Apr 10
By old know all, April 11, 2010 @ 3:10 pm
If it’s a business, you pay tax on the profit. That’s your income (rent) less expenses and overheads (mortgage interest – but not capital repayments, and maintenance). If you’re buying to let and you draw up your accounts correctly, you’re unlikely to pay much tax until you sell the property.
By Onestep downfrom God, April 13, 2010 @ 2:40 pm
You must understand the difference between income and capital.
Profit is income and you pay tax on it. After tax, if you invest it in another business, it has become capital. No tax relief between the two.
If you use the capital to acquire assets on which you can claim capital allowances, then you get tax relief via the CAs, BUT THIS IS ON THE CAPITAL.
By Doctor Deth, April 16, 2010 @ 2:38 pm
income from the business would be taxed first, then whatever you do withe the remainder is another matter entirely – if you are using it to pay down a rental property mortgage – that has no tax effect – you’re just shortening the number of total mortgage payments