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The Positive Cashflow Vs Taxable Profit Enigma

What it is and how to benefit from it by specialist property accountant Stephen Fay FCA

A typical property investor will show positive portfolio cashflow from day one yet have income tax losses that mean no income tax is due. How can this be?

This article looks at the typical investor's cashflow and tax position during the various stages of their portfolio lifecycle.

What is the 'enigma', exactly?
Most property investors follow the same financial pattern as they build and maintain a property portfolio.

Typically, in the early years of portfolio growth, tax losses will be generated, despite positive cashflow. It often puzzles investors why they have cash in the bank yet a loss on their tax return - here's why.

Simply, the total of the various allowances, expenses, reliefs and claims possible in the early growth stage 'outpaces' the positive cashflow which would otherwise be taxable.

There are three distinct portfolio stages with different cashflow versus taxable profit characteristics:

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