Tax implications if BTL flat while renting another?

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    Tax implications if BTL flat while renting another?

    My current mortgage deal is up and I want to move to another area. I would like to rent for 1-2 years before committing to the area. New rental costs will be £600-£800

    I am currently thinking of renting my flat, I will get £650 rental income and a IO BTL mortgage would be £210pm, plus factor/insurance/boiler maybe £60pm so £270 pm outgoings.

    Can someone advise the tax implications if any of doing so? Not currently paying 40% tax as I've put anything above this into my pension. Any further income would be 40% tax.

    Thanks.

    #2
    Originally posted by vectra753 View Post
    Can someone advise the tax implications if any of doing so?
    The difference between £650 and £270 (or whatever the numbers pan out to be) is added to your earned income, and you will pay tax on it accordingly. Whether you are personally living on a rented flat or an owner-occupied property is neither here no there.

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      #3
      As per Lobster. The other tax implications are that

      a) you will be able to offset the capital loss you incur on property 1 against other capital gains you make -- if any . In the unlikely instance there is a capital gain, you may have to pay tax on that depending on how long you lived there prior to renting, how long you rent, and the size of the gain.

      b) I have no idea whether home 2 might be regarded as a second home and hence subject to much higher stamp duty (it might not, in which case BTLetters will just avoid the stamp duty by moving to a succession of new own-homes). The converse would be equally absurd as it would mean that everyone would have to have sold their existing house before purchasing a new one.

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        #4
        There should be no capital gains tax on selling a former residence withing 18 months of moving out.

        Based on your figures paying £270 outgoings on £650 rental income , you still have to pay 40% tax on the £380 balance which means £152 in tax .

        So £270 outgoings + £152 tax = £422 to subtract from £650 income = £228 left to contribute towards paying rent for home2.

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