Confused about property investments and pensions? Let’s break down the key differences between holiday lets and buy-to-lets in terms of pension contributions and tax.
Pension Contributions
- Holiday Lets: You can contribute your holiday let income to your pension.
- Buy-to-Lets: Buy-to-let income can’t be contributed to your pension.
Why The Difference?
HMRC classifies holiday let income as “relevant UK earnings,” making it eligible for pension contributions. Buy-to-let income is just rental income, so no pension contributions.
Tax on Buy-to-Lets
Buy-to-let properties face several tax challenges:
- Stamp Duty Land Tax: Higher rates for additional properties.
- Mortgage Interest Relief: Can’t fully deduct mortgage interest.
- Wear and Tear: Fixed 10% wear and tear allowance is gone.
Takeaway
Holiday lets offer a unique advantage for pension planning. Buy-to-lets don’t, and they come with additional tax burdens.
Invest wisely. If you need further advice, please contact us at Kudos.
