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  • FIRST POST
    • lesterxburnham
    • By lesterxburnham 30th Nov 17, 6:36 PM
    • 49Posts
    • 0Thanks
    lesterxburnham
    Tax from renting when most of rent goes into paying off mortgage
    • #1
    • 30th Nov 17, 6:36 PM
    Tax from renting when most of rent goes into paying off mortgage 30th Nov 17 at 6:36 PM
    Hi,
    I started renting my flat from 1st September 2017. Am I understanding it correctly that I have to register for self assessment before 30th September 2018?

    Another question is whether I need to register at all if I charge £530 for rent out of which £520 is going into paying off the mortgage on that property?

    Is there anything else I need to do as far as HMRC is concerned? Do I need to pay any additional insurance contributions or other tax? I am in full time employment and I'm renting based on consent to let (i.e. my mortgage is not buy to let) if that makes any difference.
Page 1
    • elverson
    • By elverson 30th Nov 17, 6:41 PM
    • 719 Posts
    • 456 Thanks
    elverson
    • #2
    • 30th Nov 17, 6:41 PM
    • #2
    • 30th Nov 17, 6:41 PM
    If you don't know this stuff you shouldn't be a landlord.
    • dancing_star
    • By dancing_star 30th Nov 17, 6:42 PM
    • 157 Posts
    • 275 Thanks
    dancing_star
    • #3
    • 30th Nov 17, 6:42 PM
    • #3
    • 30th Nov 17, 6:42 PM
    Let me Google that for you:
    https://www.gov.uk/renting-out-a-property/paying-tax
    • JoJo1978
    • By JoJo1978 30th Nov 17, 6:47 PM
    • 180 Posts
    • 175 Thanks
    JoJo1978
    • #4
    • 30th Nov 17, 6:47 PM
    • #4
    • 30th Nov 17, 6:47 PM
    Yes you should register. Do it now so that you can start using the HMRC online help provided to understand your obligations well before you need to submit. There's lots you need to be aware of that I'm not sure you are.
    Hamster in the wheel (London) 1999-2017
    Mortgage free since 2015; Pension pot sorted 2017
    Second career (what TBD!) 2018
    • ProDave
    • By ProDave 30th Nov 17, 7:15 PM
    • 454 Posts
    • 532 Thanks
    ProDave
    • #5
    • 30th Nov 17, 7:15 PM
    • #5
    • 30th Nov 17, 7:15 PM
    You are still "self employed" so need to register with hmrc and submit a tax return.

    If your self employed business makes a loss, that may reduce the tax bill for any other income you have.
    • BoGoF
    • By BoGoF 30th Nov 17, 7:22 PM
    • 2,726 Posts
    • 1,964 Thanks
    BoGoF
    • #6
    • 30th Nov 17, 7:22 PM
    • #6
    • 30th Nov 17, 7:22 PM
    You are still "self employed" so need to register with hmrc and submit a tax return.

    If your self employed business makes a loss, that may reduce the tax bill for any other income you have.
    Originally posted by ProDave
    A little knowledge is a dangerous thing.
    • G_M
    • By G_M 30th Nov 17, 7:30 PM
    • 42,318 Posts
    • 49,159 Thanks
    G_M
    • #7
    • 30th Nov 17, 7:30 PM
    • #7
    • 30th Nov 17, 7:30 PM
    Hi,
    I started renting my flat from 1st September 2017. Am I understanding it correctly that I have to register for self assessment before 30th September 2018?
    Yes of course. Why would you not?

    Another question is whether I need to register at all if I charge £530 for rent out of which £520 is going into paying off the mortgage on that property?
    Your total mortgage payment is not a taxable expense. Only the interest is.

    Is there anything else I need to do as far as HMRC is concerned?
    Learn what are taxable expenses.

    Do I need to pay any additional insurance contributions or other tax?
    No.

    (hmmm.... CGT? CT? )
    I am in full time employment and I'm renting based on consent to let (i.e. my mortgage is not buy to let) if that makes any difference.
    Originally posted by lesterxburnham
    That is an arrangement between you and your mortgage lender. Irrelevant to HMRC.

    What did your business plan show when you prepared it before deciding to let your property?

    lots of info here, including links to relevant websites for more info:


    ** Tenancies in Eng/Wales: Guides for landlords and tenants This thread is intended to provide information to both landlords and tenants relating to Assured Shorthold Tenancies (ASTs) in England and Wales.

    Topics covered:

    * Repairing Obligations: the law, common misconceptions, reporting/enforcing, retaliatory eviction & the new tenant protection (2015)

    * Deposits:
    payment, protection and return

    * Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

    * Rent increases: when & how can rent be increased?

    * Repossession: what if a LL's mortgage lender repossesses the property?

    * New landlords: advice, information & links

    * Letting agents: how should a landlord select or sack?
    • flashg67
    • By flashg67 30th Nov 17, 7:32 PM
    • 2,300 Posts
    • 1,505 Thanks
    flashg67
    • #8
    • 30th Nov 17, 7:32 PM
    • #8
    • 30th Nov 17, 7:32 PM
    Get registered with HMRC and sign up to their email alerts service - there's loads of online seminars, videos and guides to help you fill in your return, or pay an accountant to do it. I have two BTL with my OH and we do our own.
    Log everything you spend in relation to the property as you can claim against any tax bill such as insurance, agent fees, maintenance. Morgage interest is the one thing that has changed - have a read of this - http://www.telegraph.co.uk/investing/buy-to-let/new-buy-to-let-tax-works-andhow-beat/
    • greendoor665
    • By greendoor665 30th Nov 17, 7:36 PM
    • 44 Posts
    • 91 Thanks
    greendoor665
    • #9
    • 30th Nov 17, 7:36 PM
    • #9
    • 30th Nov 17, 7:36 PM
    OP you need to read a lot more about the rules and obligations of landlords or you may be in for a nasty surprise.

    You are still "self employed" so need to register with hmrc and submit a tax return.

    If your self employed business makes a loss, that may reduce the tax bill for any other income you have.
    Originally posted by ProDave
    Not quite - renting out a property is a separate class of income from self-employment. Renting out a property does not make you self employed. There are differences in how they are treated, for example the self-employed have to pay NI but you do not pay NI on property income in most circumstances.

    Losses from property are also treated differently, in that they can only be carried forward and offset against profits from property in future tax years or against profits from other properties in the same tax year. You cannot reduce your tax payable from other sources of income.
    • Sarastro
    • By Sarastro 30th Nov 17, 8:59 PM
    • 360 Posts
    • 277 Thanks
    Sarastro
    Does this even stack up? By the time you've paid tax on the rent, aren't you going to be left with a loss each month?
    • lesterxburnham
    • By lesterxburnham 30th Nov 17, 9:04 PM
    • 49 Posts
    • 0 Thanks
    lesterxburnham
    ok, thanks for all the replies, I do appreciate your help. yes, I was reckless when setting the rent as I didn't consider tax implications. So, if I lose money in this tenancy period then be it but I want to learn from my mistakes and know how much to charge next tenants.


    I will register for self assessment and I'd like to know how much roughly I should set aside for tax.

    So, between September 2017 - March 2018 I will get £3710 from rent and I will pay £3640 mortgage on that property. My Questions is, will I pay tax off £3710 or £70 (£3710 - £3640)?

    Replies above are conflicting about insurance contributions - do I need to pay insurance contributions or not?

    Also, if that makes any difference, I live in Scotland and I'm in full time employment where I'm on 40% tax bracket. How does it affect my HMRC obligations?
    Last edited by lesterxburnham; 30-11-2017 at 9:18 PM.
    • Slithery
    • By Slithery 30th Nov 17, 9:16 PM
    • 365 Posts
    • 530 Thanks
    Slithery
    So, between September 2017 - March 2018 I will get £3710 from rent and I will pay £3640 mortgage on that property. My Questions is, will I pay tax off £3710 or £70 (£3710 - £3640)?
    Originally posted by lesterxburnham
    Neither.

    Only the interest part of the mortgage is deductible.
    • Thrugelmir
    • By Thrugelmir 30th Nov 17, 9:26 PM
    • 56,243 Posts
    • 49,614 Thanks
    Thrugelmir
    Consult an accountant. After the initial briefing you'll be able to take care of matters yourself. The accountants fees are tax deductible. So worth the investment.
    “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”
    ― Warren Buffett
    • Cakeguts
    • By Cakeguts 30th Nov 17, 9:34 PM
    • 3,280 Posts
    • 4,573 Thanks
    Cakeguts
    ok, thanks for all the replies, I do appreciate your help. yes, I was reckless when setting the rent as I didn't consider tax implications. So, if I lose money in this tenancy period then be it but I want to learn from my mistakes and know how much to charge next tenants.
    Originally posted by lesterxburnham
    You really didn't do any research before you did this did you? You cannot charge tenants however much you want. You can only charge them what your property will let for. If you charge more than your flat is worth on the rental market you won't get a tenant and it will remain vacant meaning that you will make an even bigger loss than you do now.

    No one is going to pay more for your property if they can get one the same or similar for less.

    From what you have said so far it looks as if your property is always going to make a loss as a rental so in order to stop this loss you only have one option and that is to sell it.
    • 00ec25
    • By 00ec25 30th Nov 17, 9:58 PM
    • 5,572 Posts
    • 4,973 Thanks
    00ec25
    You are still "self employed" so need to register with hmrc and submit a tax return.

    If your self employed business makes a loss, that may reduce the tax bill for any other income you have.
    Originally posted by ProDave
    no you are not "self employed"

    letting property is not a trading activity, it is an "investment" activity which has a category all of its own: income from letting

    a loss from letting activity is expressly not treated the same way as self employed losses in respect of offsetting against other taxable income
    Last edited by 00ec25; 30-11-2017 at 10:27 PM.
    • Typhoon2000
    • By Typhoon2000 30th Nov 17, 10:09 PM
    • 778 Posts
    • 364 Thanks
    Typhoon2000
    If that's a repayment mortgage you have, then I don't think you will be making any money every month after paying tax. You should not look to this as a bussiness producing a positive income every month. Rather you should look at is as some one contributing to pay off your mortgage rather you having to shoulder the full burden.
    If you are new to this you may want to go for a fully managed service from a letting agent. They may take 10% of you rent but that is tax deductible so effectively 6% in your case.
    • 00ec25
    • By 00ec25 30th Nov 17, 10:10 PM
    • 5,572 Posts
    • 4,973 Thanks
    00ec25
    So, between September 2017 - March 2018 I will get £3710 from rent and I will pay £3640 mortgage on that property. My Questions is, will I pay tax off £3710 or £70 (£3710 - £3640)?
    Originally posted by lesterxburnham
    as you have consent to let we can safely assume you have a repayment mortgage not an interest only mortgage. Therefore the "mortgage" has 2 components: a capital repayment element and an interest element. Only the interest element enters your tax calculation, and as linked in a previous post, for this and 3 more tax years there are transitional rules about how the calculation is done - read: https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

    does the property have any gas appliances? You have not mentioned the cost of the annual gas safety certificate (criminal offence not to have one if you need it)

    Replies above are conflicting about insurance contributions - do I need to pay insurance contributions or not?
    Originally posted by lesterxburnham
    possibly because you have not said what "insurance"
    - National Insurance? - No, you do not pay NI on rental profits
    - Landlord's Buildings insurance? - you be a fool not to have it (tax deductible expense)
    - Landlord Contents insurance? - maybe? your choice based on your risk appetite (tax deductible expense)
    - Rent Guarantee insurance? - maybe? your choice based on your risk appetite (tax deductible expense)

    given your lack of research (effort?) to date, here are some further links you will need to know inside out:
    http://www.hmrc.gov.uk/courses/syob3/new_letting/HTML/new_letting_menu.html

    https://www.youtube.com/watch?v=4YmcrAwptdQ&index=17&list=PL8EcnheDt1ziQSj JNRITtCf7XD_ne-_lQ&utm_source=HMRC-DSBA-Dec-3b&utm_campaign=DSBA-Campaign&utm_medium=Email

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

    and ultimately if you do not wish to employ a professional accountant who will get it right for you, you need to know everything:
    https://www.gov.uk/hmrc-internal-manuals/property-income-manual

    Also, if that makes any difference, I live in Scotland and I'm in full time employment where I'm on 40% tax bracket. How does it affect my HMRC obligations?
    Originally posted by lesterxburnham
    ask Nicola, she wants to be independent, so let her educate her people.
    Last edited by 00ec25; 30-11-2017 at 11:38 PM. Reason: punctuation
    • Thrugelmir
    • By Thrugelmir 30th Nov 17, 10:16 PM
    • 56,243 Posts
    • 49,614 Thanks
    Thrugelmir
    If that's a repayment mortgage you have, then I don't think you will be making any money every month after paying tax.
    Originally posted by Typhoon2000
    Profit and cash are two different matters. Letting after tax may well generate a profit. However this may not be enough to cover the capital element of the mortgage repayment. Hence a cashflow issue.
    “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”
    ― Warren Buffett
    • Pixie5740
    • By Pixie5740 30th Nov 17, 10:17 PM
    • 11,202 Posts
    • 15,655 Thanks
    Pixie5740
    ask Nicola, she wants to be independent so let her educate her people.
    Originally posted by 00ec25
    For those of us in Scotland who are higher and additional rate tax payers we will be caught in a !!!! sandwich of the Tories in power at Westminster and the SNP in Holyrood. Austerity cuts from one party and higher taxes from the other.

    I digress. OP, are you aware that the next tenants you get in with have one of the new Private Rental Tenancies which come into force tomorrow?
    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.
    • G_M
    • By G_M 30th Nov 17, 10:22 PM
    • 42,318 Posts
    • 49,159 Thanks
    G_M
    Please note that all the links I provided in post 7 are written from an Englandd/Wales perspective.

    You are aware I hope that in Scotland all landlords must be registered with the council?
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