Expenses off-set against income tax

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  • Neelix
    replied
    Originally posted by xenoid View Post
    aha.. that sounds like a plan. problem is I recently signed a re-mortgage for capital and interest. will see if they willing to change to interest only. alternatively sell the property. I was previously on an interest only at a worse rate and wanted to re-mortgage to a capital mortgage to pay loan of sooner. perhaps that was the mistake. should stick with interest. The property made decent equity even on the interest only mortgage.
    Interest ONLY mortgages need to be banned

    Leave a comment:


  • Gordon999
    replied
    Originally posted by xenoid View Post
    jpkeates,

    Indeed its a capital repayment mortgage at 3.09% (very high i know) .. not many lenders will to remortgage for overseas BTL at a good rate.. value of property is £330 000 and Rent £1250 increasing to £12750 in august... still not good enough for expenses. So I will sell the property.
    recent electrical re-wiring set me back £4000 as well.
    Interest rate charged at 3.09% is about 1% higher compared to 2% interest rates paid by local borrowers. If your mortgage loan is £200K, your annual interest is costing around £6,180 .
    If your rental level is £1250 per month, your rental income will be £15K .

    So roughly, your operating expenses will be around £5K and estimated profit will be £10K .
    If you carry a UK or EU passport, you can claim the personal allowance and no tax is payable.
    If you don't qualify to claim for personal allowance , then your tax on annual profit of £10K will be £2K.

    I am not sure if non-residents can claim tax credit for 20% on the £6180 loan interest = £1236. which can reduce the tax bill from £2K less £1236 to £764.approx.

    The repayment mortgage of £873 per month includes £6180 loan interest and £4200 repayment of capital towards reducing the mortgage loan.

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  • Flashback1966
    replied
    You have had some exceptional repairs bills e.g. electrics.

    Sellers are getting a good price. Not a bad time to sell.



    Leave a comment:


  • OneSmallStep
    replied
    Originally posted by xenoid View Post
    monthly rent 1250 ... buy-to let mortgage 873.12 - certificates (elec, gas, PAT, Fire and risk, EPC), maintenance and repairs, council landlord licence costs, service charges, landlord insurance.... all of these quickly erode the rental income.. mortgage is high since is an overseas Buy to let mortgage... any good advise?
    Does this £873.12 include the Capital repayment element of your mortgage or is it just the interest?
    Are you aware you can't claim tax relief on the Capital element. If it does include the capital repayment, then you aren't losing this money but paying equity into your property.

    It is concerning that you expect HMRC to make a cash payment for your losses.

    You should sell.

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  • jpkeates
    replied
    It depends on your time scale - there's nothing fundamentally wrong with using rent income to create equity.
    It's just a longer term plan.

    If you sell you'll probably have the same early term penalty as changing product.

    Leave a comment:


  • xenoid
    replied
    aha.. that sounds like a plan. problem is I recently signed a re-mortgage for capital and interest. will see if they willing to change to interest only. alternatively sell the property. I was previously on an interest only at a worse rate and wanted to re-mortgage to a capital mortgage to pay loan of sooner. perhaps that was the mistake. should stick with interest. The property made decent equity even on the interest only mortgage.

    Leave a comment:


  • jpkeates
    replied
    The mistake is to expect to make a profit with a capital repayment mortgage.

    If you're using the rent to build up equity, that's a perfectly sound plan, but it's almost impossible to make a decent annual profit at the same time (outside some quite specialist markets).
    If you want annual profit, switch to an interest only mortgage; you don't build up as much (or any) equity unless the market rises, but that's how most UK landlord's operate.

    Leave a comment:


  • xenoid
    replied
    jpkeates,

    Indeed its a capital repayment mortgage at 3.09% (very high i know) .. not many lenders will to remortgage for overseas BTL at a good rate.. value of property is £330 000 and Rent £1250 increasing to £12750 in august... still not good enough for expenses. So I will sell the property.
    recent electrical re-wiring set me back £4000 as well.

    Leave a comment:


  • g373
    replied
    Originally posted by xenoid View Post
    any good advise?
    Yes, sell up.

    Leave a comment:


  • jpkeates
    replied
    If the maintenance, insurance, certificates and other stuff is costing more than £4.5k per annum you should probably sell the property.
    That mortgage is ludicrous for a BTL, unless the value of the property and the market rent are completely out of whack or it's not interest only.

    Leave a comment:


  • xenoid
    replied
    monthly rent 1250 ... buy-to let mortgage 873.12 - certificates (elec, gas, PAT, Fire and risk, EPC), maintenance and repairs, council landlord licence costs, service charges, landlord insurance.... all of these quickly erode the rental income.. mortgage is high since is an overseas Buy to let mortgage... any good advise?

    Leave a comment:


  • jpkeates
    replied
    Originally posted by xenoid View Post
    as for your response below.. no, i submit tax on an annual basis. rent is paid in UK bank account. All expenses are listed in tax submission. all legal and above water. problem is due to repairs, landlord license, electrical certs.. service charges etc.. the losses were more than the annual rental income.. so i guess if this trend continuous, I will need to sell or take equity out of the property for other investments.
    I can easily imagine that a couple of costly repairs might knock a property into a short term loss, but a rental property let out at a rent that doesn't cover the basic costs of operating it long term sounds very odd indeed.

    How on earth can that happen?


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  • Neelix
    replied
    How many years have you been running at a loss?

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  • AndrewDod
    replied
    Sounds like a great investment. HMRC will definitely be exploring those expenses in due course.

    Leave a comment:


  • theartfullodger
    replied
    Why run a business at a loss ?

    Leave a comment:

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