Sole trader planning to buy commercial properties.

[gr_santosh]

Hi Folks

It's my first query here and I need some advice on what I am planning to do. Hope some can help me out.

I have recently set myself as a sole trader and I am make £45000 pounds a year before tax in my day job.

My outgoing are minimal and I am able to save up a large chunk of money to make an investment.

I wish to buy a commercial property priced £25000 which I plan to let long term as an investment property.

Since this is a non residential investment can some one guide me what tax I need to pay?

Full tax on £45000 or
Tax on £45000 - £25000 = £20000 after investment.

Anything else I need to be aware of? Is there any downside making this investment?

Regards
Santosh

[Lambs]

S,

I think you are asking if you will get any kind of Income Tax relief on re-investing the profits of your self-employed business into a commercial property.

You will not.

There are certain kinds of Capital Gains Tax relief, if you make a capital gain in respect of qualifying assets, and then re-invest the proceeds into other qualifying assets. But that is not the case here, and your self-employed profits will be taxed in full, regardless of whether you spend the net profits on private expenditure or a new commercial property.

The net rental income from the commercial property will also be taxable, if and when there is any.

Regards,

Lambs

[gr_santosh]

Thank you, that answers my question.