large tax bill for 2009.......

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    large tax bill for 2009.......

    Hello Tax Guru's.

    I have been renting out a house for 3 years now and I was after some advice.
    I remortgaged the year before last to a interest only mortgage to reduce my tax liability. My situtation is as follows -

    I got £16200 in rent last year, of this £7644 was allowable interest on the morgage. I spent £902 in allowable repairs/replacements making my profit for the year £7654. I am a higher rate tax payer and after taking into account my personal allowance I have worked out I have a tax bill of IRO £2600. Last year this was less as I had large remortgage costs to offset.

    My question is this - does this sound about right and what could I do in the future to lessen my tax burden? - should I for example put the property in my wifes name also?

    thanks for any advice

    Brian

    #2
    Your personal allowance will have been used up in your PAYE employment. If you are a higher rate tax payer then on that profit you will owe £3061. If your wife is a lower rate tax payer then a transfer of the appropriate share of the property via inter spousal transfer whould shift the income and reduce overall tax. This has to be done properly and reported to HMRC via Form17. Regards Peter

    Comment


      #3
      Just to add:

      It sounds as though you expensed the whole of the mortgage arrangement fee in the prior year.

      Unfortunately, you should be spreading this cost over the life of the loan.

      i.e. 20 year loan, £2,000 arrangement fee, you should claim £100 in each year of rental - not all £2,000 up front.
      I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.

      That also means I cannot share in any profits from any decisions made!

      Comment


        #4
        Hurrah! Somebody who understands how to treat loan arrangement fees. You wouldn't believe the number of people who claim to be experts who post here on this point from time to time and don't understand IAS39 & friends.

        Comment


          #5
          thanks all. Looks like I should talk to an accountant. The wife is a higher rate tax payer also.

          Comment

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