Are you thinking of putting your hard-earned money in UK real estate? Do you want to invest via crowdfunding, but concerned about tax implications (if any)? If yes, you are not alone! Many savvy investors are now exploring the world of crowdfunding. The reason is crystal clear! This method allows them to invest in properties via different investment models, like equity, P2Plending, debt, Buy-to-Let, Donation, etc.
There is no shortage of online crowdfunding platforms who are engaged in helping people invest in real estate from the comfort of their homes. However, they don’t know that the tax implications are tough to ignore. So, let’s understand the tax implications of real estate crowdfunding in the UK to avoid any unpleasant surprises. Here we go.
Income Tax: If you are earning any rental income from the property, where you have invested via a real estate crowdfunding platform, then you are subjected to income tax. This will be according to your income tax band i.e. 20%, 40% or 45%. Remember; always disclose your rental income from real estate crowd-funding investments before HMRC.
Capital Gains Tax (CGT): Suppose you choose to sell your share in a property in which you have invested earlier via a crowdfunding platform. Now, after selling it, you made some profit. In such a case, you may become liable to pay Capital Gains Tax (CGT). The best part is that you can find some ways to reduce or avoid this tax by consulting a skilled tax advisor. Try to choose one who has vast experience in helping UK clients investing in real estate.
Stamp Duty Land Tax (SDLT): While it may be possible that you don’t have to pay SDLT as an investor for real estate crowdfunding, you must look at the legal ownership structure of the platform through which you have invested in the property to know you are liable to pay SLDT or not.
Tax laws can be complex and are subject to change with changing times. So, it is advisable to seek help from a skilled professional who can help you make the best investment decision in UK real estate while focusing on your distinct financial goals. Moreover, it is not always feasible to navigate the tax implications of real estate crowdfunding and ensure tax compliance, especially when you have a busy work schedule.
Remember, apart from tax implications, there are also some risks of real estate crowdfunding, such as price fluctuations, lack of control, etc. So, staying informed about various tax rates and exciting investment opportunities is the key to success in real estate crowdfunding.