First Time Landlord Questions

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

    First Time Landlord Questions

    Hi all,

    I have relocated to Sussex (renting, not buying) and left my property behind in Yorkshire after owning, and living in it, for 10 years. I have put my property up for rent and have my first tenant moving in in August.

    Can I just clarify a (noddy) tax question with the wise of this forum? There is currently £120 difference between my mortgage and the rental income I will receive. I am currently a higher rate tax payer, my fiancee is unemployed and pays no tax. The mortgage on the rental property is joint and we are not married (yet).

    Would I be right in thinking that the tax payable is simply the difference between the mortgage and the rental income, divided by two and with the relevant tax rate applied - i.e. £60 x 40% for me and £60 x 0% for my partner (as this income will not take her over yearly tax allowance).

    Can someone confirm that the above is correct and offer any advice on the most efficient tax method to organise our affairs in the future?

    Thanks,
    B

    #2
    Tax is payable on all of your rental income. However there are numerous 'allowances' you can claim - you probably already claim 'personal allowance'. One of those allowances is mortgage interest - not necessarily the same as mortgage payments.

    I am not an expert in tax but I would guess it would make sense for you to claim 100% of the mortgage interest against your tax as there would be no benefit to your fiancée having 50% of it.

    Comment


      #3
      If the difference between mortgage interest and rental income is only £120 per month, I would be amazed if you have to pay any tax whatsoever after taking into account all the regular allowances plus maintenance etc. Also, Sussex to Yorkshire is quite a lot of miles. £0.45 per mile (round trip) for visiting the property for inspections etc.

      Comment


        #4
        To clarify "Tax is payable on all of your rental income" is not quite right tax is payable on the rental 'profit' after all allowable expenses. Are you using a letting agent. Regards Peter

        Comment


          #5
          Originally posted by TaxationPete View Post
          To clarify "Tax is payable on all of your rental income" is not quite right tax is payable on the rental 'profit' after all allowable expenses. Are you using a letting agent. Regards Peter
          Blimey, this is more of a minefield than I thought. I'm really only renting my property out due to living in an area where house sales are particularly low (lack of employment nearby) and not wanting to pay council tax on an empty property every month.

          My mortgage is on a variable rate and costs circa £460. My rental income is £650 of which the lettings agent takes 10%.

          I wrongly assumed that I could offset the entire mortgage payment, although in hindsight I understand that this would be wrong from a tax perspective as someone would be directly paying for my equity. With CGT also on a future sale, I'm beginning to think that I may have made a mistake.

          Comment


            #6
            You should not have any CGT to pay for a few years with the last36 months of ownership treated as exempt plus Lettings Relief (up to £40,000 per owner.

            Have you read HMRC's Help Sheet HS283 on the subject?

            http://www.hmrc.gov.uk/helpsheets/hs283.pdf

            Comment


              #7
              Do you have permission to rent the property out from your mortgage provide. It is a material change and permsiion must be sought. Your travel to the property is restricted to the distance from the letting agent to the property not from your home. Regards Peter

              Comment


                #8
                Originally posted by TaxationPete View Post
                Do you have permission to rent the property out from your mortgage provide. It is a material change and permsiion must be sought. Your travel to the property is restricted to the distance from the letting agent to the property not from your home. Regards Peter
                Yes I do. Scottish Widows are my mortgage provider and have provided a "side letter" allowing me to rent the property at a cost of £400 per annum. Again, I was hoping this would be an allowable expense!

                Comment


                  #9
                  Don't wish to be gloomy but you seem to be assuming you will get the rent... Hope you don't get the tenant-from-hell (or the letting-agent-from-hell) (or, indeed, the "rent-guarantee-scheme-from-hell). ONLY rent out if you have the emotional & financial resources to cope with these whilst paying mortgage & legal fees to evict & repair costs (oh yes, or judge will conclude you're harassing tenant & let them stay longer..)

                  Cheers & welcome to the fun world of lettings....
                  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


                    #10
                    The method of calculating your annual rental profit is -

                    Rental income = 650 x 12 months = 7800

                    Allowable expenses =

                    letting agent at 10% = 780
                    Mortgage loan interest at say 350/month = 350 x 12 = 4200
                    Buildings insurance = 400 say

                    Annual profit = 7800- 780-4200-400 = 7800 - 5380 = 2420 or 1210 if shared equally.

                    So you would pay tax at 40% = 1210 x 0.4 = 482.50

                    Your partner has personal tax allowance of 8105 and pays no tax.

                    If you and your partner write a simple agreement to give ALL the rental profit to your partner and both sign it , your partner could send it with a tax return to hmrc and not have any tax to pay.

                    But before you decide to let , you need to check the local estate agents on the state of the letting market in your area and the average waiting time for a tenant.

                    Comment


                      #11
                      Originally posted by berneslai View Post
                      Yes I do. Scottish Widows are my mortgage provider and have provided a "side letter" allowing me to rent the property at a cost of £400 per annum. Again, I was hoping this would be an allowable expense!
                      Does £400 seem high to anyone else? I pay Alliance & Leicester £95 for mine.

                      Comment

                      Latest Activity

                      Collapse

                      • CGT and income
                        by slopemaster
                        Considering selling our rental property and trying to estimate how much CGT is due. We are both basic rate tax payers and the gain from the property will take us into higher rate, so the amount of tax we pay will depend on income for that year – it does vary year to year. I presume the relevant income...
                        06-07-2022, 05:47 AM
                      • Reply to CGT and income
                        by Gordon999
                        The capital gains Tax form SA108 is submitted after sale of property .

                        https://assets.publishing.service.go...sa108-2022.pdf
                        07-07-2022, 11:38 AM
                      • Reply to CGT and income
                        by slopemaster
                        Thank you all
                        06-07-2022, 14:47 PM
                      • Reply to CGT and income
                        by Lesney Park
                        Yes

                        You do, or better an accountant but essentially you report and pay the gain at HMRC https://www.gov.uk/report-and-pay-yo...r-6-april-2020 estimating what you need to, and then report it again essentially in your tax return...
                        06-07-2022, 08:34 AM
                      • Reply to CGT and income
                        by jpkeates
                        You estimate your income for this year and declare and pay the tax accordingly.
                        When you complete your tax return for the tax year, the figures are adjusted then....
                        06-07-2022, 08:27 AM
                      • Reply to CGT and income
                        by theartfullodger
                        60 days not 2 months.
                        06-07-2022, 07:50 AM
                      • Reply to SDLT and first time buyers
                        by DoricPixie
                        How old are these children if they have yet to go to university?...
                        04-07-2022, 22:50 PM
                      • SDLT and first time buyers
                        by mpppen
                        Hello again.

                        Just wondering if someone can advise.

                        If I sell a BTL to my children who do not own their own property, I understand that they'll get the stamp duty relief.... two questions then.

                        If they're buying the £350,000 jointly, does the relief count for...
                        03-07-2022, 21:52 PM
                      • Reply to SDLT and first time buyers
                        by jpkeates
                        If the buyers are going to rent the property while they go to university, it may meet the criteria for Stamp Duty Relief but it may not.
                        It would be unusual for siblings leaving university to be able to commit to cohabit in a particular place when they graduate.

                        There's obviously...
                        04-07-2022, 15:14 PM
                      • Reply to SDLT and first time buyers
                        by AndrewDod
                        Apart from anything else, if you are selling the property to the kids, you are getting cash and they have a 100% mortgage - and then they are not actually paying a mortgage on 100% of 350K you will be paying it -- it is not a classic GROB, but risks falling foul of GROB rules - so when you die, even...
                        04-07-2022, 14:45 PM
                      Working...
                      X