No income and BTL tax in 2020

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    No income and BTL tax in 2020

    Hi,

    Just confirming BTL rental income tax is income tax. If in 2020 (assuming income tax bandings are the same) I have no income but I get 20000 income from a BTL investment. I won't pay any tax because 11000 will be tax free anyway and the other 9000 will be 0% tax because of the tax credit for BTL. Is that correct?

    Thanks,

    Chris

    #2
    Please remember that you deduct a maximum of 20% of the mortgage interest so in simple terms if the mortgage interest plus say £300 Buildings Insurance the balance is your income , deduct your personal allowance and the balance is what you will pay tax on.

    Comment


      #3
      The sequence of the calculation is important.

      You do have an income, it's £20,000 per annum.
      Assuming no other deductions for repairs, agents fees, etc, you are liable to pay tax on the £9000 that's over the (assumed) £11k threshold at 20%, so £1800.
      You can then deduct a restricted allowance of 20% of the cost of any mortgage interest.
      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


        #4
        jpkeates,

        Thanks that's clearer now. So to continue the worked example, if my mortgage interest was £5k for example. Then I'd get £1k back. So in total (Assuming no other deductions) then that would be £800 I pay as tax. Correct?

        Comment


          #5
          Yes, that's correct.
          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

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