Income tax and capital gains tax questions

[Twoddle]

INCOME TAX

If my income were to come not from a regular job, but from the following:

(1) Interest paid to me on a large sum I have loaned to a business

(2) Rent from two properties I own

... would my personal tax bill be worked out in the normal income tax fashion - tax-free allowance, 10% tier, 22% tier, etc? Or would it come under some other taxation scheme?

CAPITAL GAINS TAX

Also, am I right in thinking that if I were to eventually sell the two income-generating properties, I would have to pay capital gains tax on the increase in their value from the point of my owning them to the point of my selling them?

Presuming this to be the case, how would this be calculated if I were to actually build these two properties on my land? I.e. I already own the land, and would build the properties and then rent them out. Would gains be calculated from the point of them becoming properties in their own right, or from the value of the land they'd been built on, which is the asset I already own? If the latter, I'd be shafted!

Hope this makes sense. Thanks

Not sure about the tax as my accountant sorts that. But you do get some relief on the income as you dont pax tax on interest from your mortgage.

As for capital gains (I also have 2 rental properties) One was also built on land I owned. The take into account the cost of the land and keep all recipts for the build etc, these costs are then deducted, then I believe you have an allowence of about £3000. So then pay capital gains which I think from april is a straight 18% of any increase in value.

Thanks, caykon. Just to confirm ...

So the land value (say, £100k) and build cost (say, 150k) are added together - totalling in this example £250k. This would be taken as the starting value of my asset, yes? So, if the property is then worth £300k, the difference - £50k - is then taxed at 18%? Thanks. That's helpful.

For Income tax, yet you are subject to the same tax allowances and rates whether your income is earned or unearned unless it is dividend income.

For CGT you would be able to claim the costs of building the houses as well as part of the acquisition cost. If you really were planniing to do this you should however consult an accountant before you start to build as there will be various ways to minimise the tax liability.

Twoddle as a basic guide yes that is how it goes.

i brought land for £7,000 dad built house cost me 20,000 now valued at £180,000 ouch!!!!! dont think I will be selling very soon

Hmm. On further investigation, it looks like I'd have to pay close to 40% on the gains upon selling. Going to have to do some maths to work out if better to sell straight after build, or much later on. Blimey, I'm not stupid but this takes some thinking about!

caykon - understand you not wanting to sell any time soon!

LadyMuck - speaking to accountant sounds a wise move.

Thanks