Monday, 11 November 2013

Rental Income vs Other Investment Income

Despite the fact that there is no national insurance on rental income it could prove to be a source which is a lot less tax efficient than income from investments such as Company Shares with a high dividend yield,

This is a particularly important Tax Planning Point to keep in mind if you are weighing up the pros and cons in investing in Property against investing in other investments.
This is not to mention that if you hold your shares or money in an ISA or Pension, then any Dividends and Interest earned on them are completely tax free.  

To emphasise this look at the following example:

Mr X receives £5,000 of dividends from his shares in Company A.  Mr X has other annual income through PAYE totaling £15,000.  Mr X has no further tax to pay on the dividends.

However, if Mr X, instead of the Dividend Income, receives £5,000 of Rental Income.  He will have additional tax of £1,000 to pay.

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