Bricks and mortar and tax implications

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Over recent years attitudes to retirement planning have changed and increasingly individuals look to ‘bricks and mortar’ as an alternative. This may be great as an investment, but how does it compare from a tax point of view?

With the exception of the tax-free gains usually available on your family home (your Principal Private Residence), profits made from residential property don’t benefit from any special tax treatment. In fact, any capital gains made could be taxed at a higher rate than other investments, such as stocks and shares. There is also Stamp Duty Land Tax to be paid on the purchase, which on residential property can attract a supplementary 3 per cent charge.

The main difference between property and pensions is that with property you pay the tax as you go along (on rental income and capital gains), but with a pension scheme the tax comes at the end when you draw your income. So which is better? Well that depends on your personal preference and how the numbers work for you. As always, professional advice is vital for an informed decision.