About to become a first time landlord

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    About to become a first time landlord

    Hello, hoping for some advice please.

    Hubby and I have inherited a mortgage free property and are looking to rent it. We are using a rental agency to do everything as we don't have the capability or time to deal with things ourselves, so for us it is worth paying the monthly agency fees. They already have someone wanting to view, and the property was only cleared out a few days ago.

    My question concerns some practicalities regarding managing financial affairs, in particular tax. I work full time, my income is in the region of £33k so I pay basic tax on a slightly enhanced personal allowance to offset professional membership fees. Hubby is registered blind, so has an additional £2,500 personal tax allowance taking this up to £15k a year before tax. His income is contribution based ESA at the enhanced rate as he is permanently disabled following a brain injury, and a couple of very small pensions. We had thought that the rental income should be split 50/50 after expenses/repairs for tax purposes, but having read a few other posts on here, I am now not so sure.

    Even taking the rental into account, hubby's personal tax allowance is still not likely to be used in full, meaning he will not pay any tax at all. I, on the other hand, will have to pay tax on the full 50%, and it may even tip me over into the higher tax bracket depending on any annual bonuses that might come my way.

    Is there any advantage of splitting the rental income in favour of hubby? Or would it be better to transfer his unused portion of his personal tax allowance to me. Are there any other things we should consider that could be claimed against tax? I know that we will be able to offset tax with the agency fees and any repairs, but is there anything else we could look at? The property will be let unfurnished, except for white goods and fitted furniture. The rental will also include a small additional charge to pay for a gardener to come in a couple of times a month to keep things tidy, but I don't know if that could also be taken into account as the tenants will actually be paying that.

    Another question, is it worth setting up as limited company instead of private individuals? We only have the one property, and at this point have no plans for buying another to rent.

    Sorry for the long first post, but very grateful for any replies.

    #2
    There may be advantages of working through a company, but the cost of setting up the company and transferring the property into it would almost certainly make it expensive in the short term, even if it makes more sense over a longer time frame.
    But you'd need to talk things through with an accountant or solicitor to be sure - everyone's financial situation is unique.

    You can change the allocation of income from the default 50:50 to whatever split you would prefer - you would need a solicitor to check the ownership is correct, create a deed of trust and notify HMRC (using a special form, which is form 17). This is really simple bread and butter stuff for a solicitor and is very common where a married couple have a different level of income.

    On the other hand, it's possible the cost of setting that up is more than the saving in tax, so it might be worth waiting for the first year and seeing what difference it makes to your tax.

    Any costs you incur in maintenance or repair should normally be allowable against your income for tax purposes. So if the rent includes the provision of a gardening service, the cost of the gardener would be an allowable business expense.

    While it sounds like an odd thing to say, you should be very wary of an agent who do "everything" when you are not familiar with the new business you are starting. You have to be ready to manage the agency, to make sure that they do everything that they're supposed to. There's a good guide to what you should know here - https://forums.moneysavingexpert.com...ds-and-tenants
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Thank you, that is very helpful. We have a lot to learn

      Comment


        #4
        Don't assume an agent will be helpful. Too many posts here and on other Landlord sites where agents get think wrong, don't know the law etc etc.

        But there are good agents: I use two!
        I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

        Comment


          #5
          Originally posted by theartfullodger View Post
          Don't assume an agent will be helpful. Too many posts here and on other Landlord sites where agents get think wrong, don't know the law etc etc.

          But there are good agents: I use two!
          So I am learning! The agent we are using is a small, family run, estate agents who do a small amount of rental business and have been in business for many years, and are well known and thought of in the local community as they live here too. They are registered with various professional bodies, including the Property Ombudsman. They have been very helpful and gone through all the legal requirements of being a landlord, all the certificates needed, and the upcoming regulatory changes due to come in shortly etc. They use local tradesmen, many of whom I already know and have used myself, for any repairs and emergencies. It is very much a personal service, so I am happy with my choice of agent and to leave the majority of things for them to deal with. I have set a limit of £150 on spending without authority for emergency repairs, but as the local tradesmen are all old fashioned guys who don't over charge anyway, I''m pretty confident I won't get ripped off for unnecessary charges.

          Comment


            #6
            Originally posted by lyons View Post
            The agent we are using is a small, family run, estate agents who do a small amount of rental business and have been in business for many years, and are well known and thought of in the local community as they live here too.
            That's a good start.

            Outside city centres, most areas have one or two agents who basically "own" the estate agency business and everyone uses them.
            That tends to mean that there isn't anyone "better", so you do what everyone else does.
            Which, at least, means its a level playing field.
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment

            Latest Activity

            Collapse

            • Reply to Advice
              by SouthernDave
              I started my limited company a year before buying the first property, then bought a second 2 months later, a third 3 months after that, a fourth 5 months after that and so on to where I am now. Our lenders have never said they want a separate company per property. Ive never heard of that, if it were...
              23-01-2022, 17:40 PM
            • Advice
              by jhoggard
              Hi,

              I currently have a property rented out in my own name with a fair bit of equity around 50% LTV this is actually a repayment mortgage which i'm looking to switchover to a interest only. When i do this i'm also taking money out of the property to put towards another which i'm looking...
              20-01-2022, 14:25 PM
            • Reply to Advice
              by jpkeates
              I don't think we disagree.

              The OP has one property and is looking to buy a second.
              At that point in that business, lenders will want a company per property.

              There's a point where that ceases to be the case, when the portfolio gets big enough, or, presumably when someone...
              23-01-2022, 17:34 PM
            • Reply to Advice
              by SouthernDave
              i concur with this, once you get over 4 properties, they consider you to be a portfolio landlord and want to start seeing cashflow forecasts before lending to make sure the company is buoyant. Directors guarantees each time but no limits on number of properties or number of dofferent lenders....
              23-01-2022, 16:50 PM
            • Reply to Advice
              by JamesHopeful
              This is not true in my experience. I currently have eight properties in the same company, across a number of different mainstream BTL lenders, and none of them have batted an eyelid at the number.

              Where I have known lenders worry about the company is it doesn't have the correct SIC code...
              23-01-2022, 16:28 PM
            • Reply to Advice
              by theartfullodger
              Depends to a great degree on tax regulations over the coming years. We only know what the rules are today, not what they'll be in future e.g. when you retire

              I expect chancellors to cut back on the advantages of people owning property through companies (well, wouldn't you if you were chancellor)...
              22-01-2022, 13:06 PM
            • Reply to Advice
              by Gordon999
              1. No. You have not sold the property yet

              2. 19% on profit by company.

              3. Seek advice from accountant.
              22-01-2022, 09:36 AM
            • haring inherited property
              by halfax
              i am inheriting a property and would like to place half in my grandsons name.
              as anyone done similar?...
              19-01-2022, 18:12 PM
            • Reply to haring inherited property
              by halfax
              thanks for help to everyone who replied, great forum
              21-01-2022, 18:55 PM
            • Reply to Looking for tax / financial advice for a BTL /holiday let long-held portfolio
              by ifallelsefails
              I watched a webinar from Landlord studio and this man Tony Gimple was featured in it. Have a look at his Linkedin profile:
              https://www.linkedin.com/in/tonygimp...alSubdomain=uk
              He has a website whereby he consults exactly to your situation:
              https://www.bel.gb.net/
              ...
              21-01-2022, 17:13 PM
            Working...
            X