Landlords: are you liable to pay property income tax?

There are many different income tax-saving strategies, but it is important to understand what is meant by the term income tax and when property investors and landlords are liable to pay it.

Income tax liabilities for investors/traders

Anybody investing in property is liable to pay income tax on any profitable income that is generated from their properties.

There are two types of people who invest in property and both are liable to pay income tax. These people are:

The property investor.
The property dealer/trader.

Let's discuss them in more detail.

The property investor

If you invest in property for the long term (i.e. you have buy-to-let properties), you're a property investor. You're a property investor if you hold on to a property for the long term.

What are you liable for?

If you're letting out your investment properties, you will be liable to pay income tax annually on the profits you gain from the rent.

The Property trader/dealer

If you're investing in property for the short term (i.e. 6–12 months) and you intend to sell with the aim of generating a dealing profit, you're a property dealer or property trader. Most full-time property developers or renovators are classed as property dealers/traders.

What are you liable for?

Property dealers and traders are liable to pay income tax when they sell the property.

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