No income tax to pay when selling Buy to Lets

We're pleased to report that HMRC has clarified speculation relating to the tax applied when landlords sell their investment properties.

Rumours had suggested that amendments to the Finance Bill would see landlords paying income tax rather that capital gains tax when they sold a buy-to-let property they own. HMRC spoke to the National Landlords Association to quash these rumours and to clarify the tax position for landlords. The official statement is as follows:

"HMRC considers that generally property investors that buy properties to let out to generate property income and some years later sell the properties will be subject to capital gains on their disposals rather than being charged to income on the disposal. The exception, that is the reason why it says generally above, is that:

• If the investor decides to undertake development prior to sale the profit on the developed part, from the date the decision to develop for sale, will be trading income. But that would be trading income without the new legislation
• If the investor sells the land in a contract with a 'slice of the action' clause (allowing them to benefit from changes in the future development of the property), the slice of the action profit will be taxed under the new legislation - but it was previously taxed under the transactions in land legislation.

Further guidance on the issue is likely to be released by HMRC in the near future and we'll update landlords via our lettings notice board. If you would like any further or immediate explanation, please contact our lettings team today.