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  • FIRST POST
    • pbsmiles
    • By pbsmiles 2nd Oct 17, 2:49 PM
    • 98Posts
    • 58Thanks
    pbsmiles
    Renting House Out And Tax Bill
    • #1
    • 2nd Oct 17, 2:49 PM
    Renting House Out And Tax Bill 2nd Oct 17 at 2:49 PM
    Hello
    My partner started renting a house out which is has a buy to let mortgage on, can anyone advise how this works with regard to paying tax on the earnings? The rent is more or less the mortgage.

    Thank you
Page 1
    • Comms69
    • By Comms69 2nd Oct 17, 2:50 PM
    • 1,270 Posts
    • 1,032 Thanks
    Comms69
    • #2
    • 2nd Oct 17, 2:50 PM
    • #2
    • 2nd Oct 17, 2:50 PM
    Declare income, deduct any allowable expenses (this is shortly to change to no longer allow mortgage interest I believe)
    • pbsmiles
    • By pbsmiles 2nd Oct 17, 2:52 PM
    • 98 Posts
    • 58 Thanks
    pbsmiles
    • #3
    • 2nd Oct 17, 2:52 PM
    • #3
    • 2nd Oct 17, 2:52 PM
    Declare income, deduct any allowable expenses (this is shortly to change to no longer allow mortgage interest I believe)
    Originally posted by Comms69
    When you say declare income, what would be classed as the income the whole monthly rent or the rent less the mortgage and estate agents fees?
    • tiz
    • By tiz 2nd Oct 17, 2:52 PM
    • 98 Posts
    • 112 Thanks
    tiz
    • #4
    • 2nd Oct 17, 2:52 PM
    • #4
    • 2nd Oct 17, 2:52 PM
    Only the mortgage interest counts, not the whole payment if it's a repayment mortgage.
    • Pixie5740
    • By Pixie5740 2nd Oct 17, 2:52 PM
    • 11,198 Posts
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    Pixie5740
    • #5
    • 2nd Oct 17, 2:52 PM
    • #5
    • 2nd Oct 17, 2:52 PM
    The capital repayment of the mortgage is not an allowable expense.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • pbsmiles
    • By pbsmiles 2nd Oct 17, 2:54 PM
    • 98 Posts
    • 58 Thanks
    pbsmiles
    • #6
    • 2nd Oct 17, 2:54 PM
    • #6
    • 2nd Oct 17, 2:54 PM
    Only the mortgage interest counts, not the whole payment if it's a repayment mortgage.
    Originally posted by tiz
    I don't quite understand.

    The rent is 450
    The mortgage is 370
    The letting agent fee is say 40

    sorry to sound silly its just very new to us.
    • ProDave
    • By ProDave 2nd Oct 17, 2:58 PM
    • 447 Posts
    • 525 Thanks
    ProDave
    • #7
    • 2nd Oct 17, 2:58 PM
    • #7
    • 2nd Oct 17, 2:58 PM
    So monthly income is £450 (This is your turnover)
    Monthly expenses are £370+40 *

    There will be other expenses such as insurance, maintenance and repairs etc, so chances are your profit will be tiny, or even a loss (particularly if there is a void period)

    It still has to be declared even if there is no profit, on the Land and Property section of your tax return.

    * You are only allowed to deduct the mortgage INTEREST, so if that £370 is your total monthly payment, your interest will be a lot less. See your mortgage statement for what the interest is each month or year, that is the amount you are allowed to deduct as an expense.
    Last edited by ProDave; 02-10-2017 at 3:02 PM.
    • bris
    • By bris 2nd Oct 17, 3:05 PM
    • 7,094 Posts
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    bris
    • #8
    • 2nd Oct 17, 3:05 PM
    • #8
    • 2nd Oct 17, 3:05 PM
    Interest only mortgages are very hard to get now so I suspect the whole 370 is not interest. Only the interest within the 370 is tax deductible. You will get a yearly statement that tell you the yearly interest you pay. The rest is classed as profit for tax reasons.
    • Comms69
    • By Comms69 2nd Oct 17, 3:13 PM
    • 1,270 Posts
    • 1,032 Thanks
    Comms69
    • #9
    • 2nd Oct 17, 3:13 PM
    • #9
    • 2nd Oct 17, 3:13 PM
    When you say declare income, what would be classed as the income the whole monthly rent or the rent less the mortgage and estate agents fees?
    Originally posted by pbsmiles


    You Declare the full amount received and then deduct the relevant expenses.


    income, not profit.
    • Crashy Time
    • By Crashy Time 2nd Oct 17, 3:21 PM
    • 5,288 Posts
    • 2,219 Thanks
    Crashy Time
    http://www.telegraph.co.uk/investing/buy-to-let/buy-to-let-tax-changes-will-cost-20k-year-this-going-do/
    • kingstreet
    • By kingstreet 2nd Oct 17, 3:23 PM
    • 32,366 Posts
    • 17,376 Thanks
    kingstreet
    Interest only mortgages are very hard to get now so I suspect the whole 370 is not interest. Only the interest within the 370 is tax deductible. You will get a yearly statement that tell you the yearly interest you pay. The rest is classed as profit for tax reasons.
    Originally posted by bris
    Interest Only is still widely available on BTL products.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • kingstreet
    • By kingstreet 2nd Oct 17, 3:25 PM
    • 32,366 Posts
    • 17,376 Thanks
    kingstreet
    I don't quite understand.

    The rent is 450
    The mortgage is 370
    The letting agent fee is say 40

    sorry to sound silly its just very new to us.
    Originally posted by pbsmiles
    When you say the mortgage is £370, is that just interest, or is any part of it going to repay some of the amount borrowed?

    Only the part paying interest cab be used to offset allowable expenses.

    In the next few years, the mortgage interest is going to be restricted which will affect higher rate taxpayers.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • Crashy Time
    • By Crashy Time 2nd Oct 17, 3:27 PM
    • 5,288 Posts
    • 2,219 Thanks
    Crashy Time
    http://www.section24.org.uk/landlord-tax/
    • 00ec25
    • By 00ec25 2nd Oct 17, 3:39 PM
    • 5,559 Posts
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    00ec25
    in respect of mortgages ONLY THE INTEREST component is an eligible expense when calculating the net taxable profit.

    there are dozens of websites covering how to calculate the net taxable profit from letting ("renting out") a property, this is the obvious start point since it is on the .Gov website (dumbed down guide):

    https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income

    if/when you need more detailed advice then HMRC has rather a lot of info on what can and cannot be claimed as a cost given the period up to 20/21 has transition rules if you are a higher rate taxpayer (if you are a basic rate taxpayer nothing has changed):

    https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords

    and the full info is in the manual:
    https://www.gov.uk/hmrc-internal-manuals/property-income-manual
    Last edited by 00ec25; 02-10-2017 at 3:44 PM.
    • G_M
    • By G_M 2nd Oct 17, 3:43 PM
    • 42,280 Posts
    • 49,122 Thanks
    G_M
    Now that your query has been answered (thanks 00ec25), how clued up is your partner on the other aspects of his business?
    • Comms69
    • By Comms69 2nd Oct 17, 3:43 PM
    • 1,270 Posts
    • 1,032 Thanks
    Comms69
    that is the second time you have posted such rubbish

    in respect of mortgages ONLY THE INTEREST component is an eligible expense when calculating the net taxable profit.

    there are dozens of websites covering how to calculate the net taxable profit from letting ("renting out") a property, this is the obvious start point since it is on the .Gov website:

    https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income

    if/when you need more detailed advice then HMRC has rather a lot of info on what can and cannot be claimed as a cost given the period up to 20/21 has transition rules if you are a higher rate taxpayer (if you are a basic rate taxpayer nothing has changed):

    https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords

    and the full info is in the manual:
    https://www.gov.uk/hmrc-internal-manuals/property-income-manual
    Originally posted by 00ec25


    What? Read it again, I said you declare the income, then deduct expenses.


    You don't declare the profit then deduct expenses.
    • 00ec25
    • By 00ec25 2nd Oct 17, 3:52 PM
    • 5,559 Posts
    • 4,955 Thanks
    00ec25
    What? Read it again, I said you declare the income, then deduct expenses.


    You don't declare the profit then deduct expenses.
    Originally posted by Comms69
    I have edited my post so as not to accuse you, however, for posterity, what you actually said was far from clear given what you stated was "income, not profit"

    You Declare the full amount received and then deduct the relevant expenses.


    income, not profit.
    Originally posted by Comms69
    • Comms69
    • By Comms69 2nd Oct 17, 4:16 PM
    • 1,270 Posts
    • 1,032 Thanks
    Comms69
    I have edited my post so as not to accuse you, however, for posterity, what you actually said was far from clear given what you stated was "income, not profit"
    Originally posted by 00ec25


    Which was quoting this:


    Originally Posted by pbsmiles
    When you say declare income, what would be classed as the income the whole monthly rent or the rent less the mortgage and estate agents fees?


    - in context it makes perfect sense.



    • 00ec25
    • By 00ec25 2nd Oct 17, 5:31 PM
    • 5,559 Posts
    • 4,955 Thanks
    00ec25
    - in context it makes perfect sense.
    Originally posted by Comms69
    LOL

    you did not quote the context

    you posted the random comment "income not profit"

    to quote a comment you :
    1. hit the quote button
    2. use the delete button carefully to edit out extraneous verbage
    3. post

    so, for example, your comment above has been edited thus to remove unnecessary words, spaces, and several lines of irrelevant on/off italics commands that do nothing:

    Which was quoting this:


    Originally Posted by pbsmiles
    When you say declare income, what would be classed as the income the whole monthly rent or the rent less the mortgage and estate agents fees?


    - in context it makes perfect sense.



    Originally posted by Comms69
    Last edited by 00ec25; 02-10-2017 at 5:34 PM.
    • chappers
    • By chappers 2nd Oct 17, 6:55 PM
    • 2,948 Posts
    • 1,701 Thanks
    chappers
    Declare income, deduct any allowable expenses (this is shortly to change to no longer allow mortgage interest I believe)
    Originally posted by Comms69
    Correct, phased until 2020. if the OP doesn't understand the basic concept I'm not even going to attempt to try and explain the ramifications of that one.

    I would suggest they employ an accountant or at the very least take advantage of a free half hour with one.
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