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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 3
    • BoGoF
    • By BoGoF 2nd Dec 17, 9:42 AM
    • 2,717 Posts
    • 1,951 Thanks
    BoGoF
    The capital part of the mortgage payment is savings/equity so does not count on the P&L.
    Originally posted by getmore4less
    I do realise this. I was talking purely from a monthly real terms cash position and OP saying he did not want to lose money. Unless the property is gaining more value than the monthly cash loss he is losing money.
    • Pixie5740
    • By Pixie5740 2nd Dec 17, 9:43 AM
    • 11,196 Posts
    • 15,643 Thanks
    Pixie5740
    It's a shame there's not a McG_M.
    Originally posted by kinger101
    I have thought about writing guides for private tenants in Scotland but it's a bit more complicated as there are 3 types of tenancies that can be in place, well 4 if you count the pre-02/01/1989 regulated tenancies. Shelter Scotland's website is a good resource for information.
    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.
    • getmore4less
    • By getmore4less 2nd Dec 17, 10:04 AM
    • 30,771 Posts
    • 18,381 Thanks
    getmore4less
    I do realise this. I was talking purely from a monthly real terms cash position and OP saying he did not want to lose money. Unless the property is gaining more value than the monthly cash loss he is losing money.
    Originally posted by BoGoF
    Not the case.

    on monthly cash flow the deficit has to be sufficient for there to be no capital payment before there is a real loss.
    • da_rule
    • By da_rule 2nd Dec 17, 11:28 AM
    • 2,519 Posts
    • 2,230 Thanks
    da_rule
    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?
    Originally posted by G_M
    You need to register in Wales as well dont you?

    https://www.rentsmart.gov.wales/en/landlord/landlord-registration/
    • lesterxburnham
    • By lesterxburnham 2nd Dec 17, 5:08 PM
    • 49 Posts
    • 0 Thanks
    lesterxburnham
    rental profit after non finance costs and partially restricted mortgage interest = 1,925

    tax payable 1,925 x 40% = 770
    add back 25% balance of mortgage interest relief capped at 20%: (7*300= 2100 x 25% = 525. check if 525 is less than the property profits (1,925), yes it is, therefore use finance costs not deducted above in capped relief calculation: 525 x 20% = 105

    net post tax profit in cash terms: 1,925 - tax (-770 + 105) = 1,260
    Originally posted by 00ec25
    thanks for that!

    generally, even after I pay the tax, someone is paying off 80% of my mortgage, how is that a bad deal? some users hinted on selling - well, if I were to sell, then what investment would give me at least 400 a month?
    • getmore4less
    • By getmore4less 2nd Dec 17, 5:21 PM
    • 30,771 Posts
    • 18,381 Thanks
    getmore4less
    thanks for that!

    generally, even after I pay the tax, someone is paying off 80% of my mortgage, how is that a bad deal? some users hinted on selling - well, if I were to sell, then what investment would give me at least 400 a month?
    Originally posted by lesterxburnham
    How did you get to 400pm?
    • rtho782
    • By rtho782 2nd Dec 17, 5:22 PM
    • 1,036 Posts
    • 748 Thanks
    rtho782
    thanks for that!

    generally, even after I pay the tax, someone is paying off 80% of my mortgage, how is that a bad deal? some users hinted on selling - well, if I were to sell, then what investment would give me at least 400 a month?
    Originally posted by lesterxburnham
    I'm making about 600 a month mining bitcoins with 6 1080tis.

    So that's an option I guess
    Deposit Saved since 01/12/15: 13,000 / 15,000 House Bought!

    Debt Cleared since 01/12/15: 6,000 / 7,500
    • getmore4less
    • By getmore4less 2nd Dec 17, 5:26 PM
    • 30,771 Posts
    • 18,381 Thanks
    getmore4less
    How much real cash do you have invested in this place( include every fee not just the deposit), how big is the mortgage and what rate?
    • Crashy Time
    • By Crashy Time 2nd Dec 17, 5:27 PM
    • 5,274 Posts
    • 2,217 Thanks
    Crashy Time
    Well there are over 10,000 users a day on the HPC site who by definition (and completely misguided and flawed logic) have been paying off landlord's mortgages for well over a decade so for many the dream is actually a reality.
    Originally posted by MobileSaver

    That is exactly the type of logic that got the OP into the pickle that he is in..
    • Crashy Time
    • By Crashy Time 2nd Dec 17, 5:30 PM
    • 5,274 Posts
    • 2,217 Thanks
    Crashy Time
    thanks for that!

    generally, even after I pay the tax, someone is paying off 80% of my mortgage, how is that a bad deal? some users hinted on selling - well, if I were to sell, then what investment would give me at least 400 a month?
    Originally posted by lesterxburnham

    The plan comes unstuck when you have voids? How many tenants have you had?
    • Cakeguts
    • By Cakeguts 2nd Dec 17, 5:36 PM
    • 3,274 Posts
    • 4,563 Thanks
    Cakeguts
    thanks for that!

    generally, even after I pay the tax, someone is paying off 80% of my mortgage, how is that a bad deal? some users hinted on selling - well, if I were to sell, then what investment would give me at least 400 a month?
    Originally posted by lesterxburnham
    It isn't giving you 400 a month because that goes on repaying the mortgage. You are losing money each month. All that needs to happen is that you get a bad tenant and then you will lose a seriously lot of money.

    Because you didn't do any research you are trying to make a profit on a property that isn't suitable as a rental property.
    • AnotherJoe
    • By AnotherJoe 2nd Dec 17, 6:53 PM
    • 7,672 Posts
    • 8,286 Thanks
    AnotherJoe
    IAll I want is someone to pay off my mortgage and I don't want to lose money. Which is the reason why I'm asking how to figure out how much rent should I charge so I'm on zero after paying tax and whatever else I need to pay to HMRC.
    .
    Originally posted by lesterxburnham
    So youd better also include maintenance expenses, void periods, insurance, any leasehold and management costs, cleaning costs for new tenants.
    • Pixie5740
    • By Pixie5740 2nd Dec 17, 6:56 PM
    • 11,196 Posts
    • 15,643 Thanks
    Pixie5740
    So youd better also include maintenance expenses, void periods, insurance, any leasehold and management costs, cleaning costs for new tenants.
    Originally posted by AnotherJoe
    The property is in Scotland and is therefore not leasehold. Nor is there any ground rent as someone else suggested earlier.
    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.
    • Crashy Time
    • By Crashy Time 3rd Dec 17, 10:20 AM
    • 5,274 Posts
    • 2,217 Thanks
    Crashy Time
    It isn't giving you 400 a month because that goes on repaying the mortgage. You are losing money each month. All that needs to happen is that you get a bad tenant and then you will lose a seriously lot of money.

    Because you didn't do any research you are trying to make a profit on a property that isn't suitable as a rental property.
    Originally posted by Cakeguts

    And the value of the property will probably sink if there are rate hikes or recession up ahead.......double bad.
    • 00ec25
    • By 00ec25 3rd Dec 17, 12:34 PM
    • 5,558 Posts
    • 4,952 Thanks
    00ec25
    And the value of the property will probably sink if there are rate hikes or recession up ahead.......double bad.
    Originally posted by Crashy Time
    there is nothing like a post from Crashy to make me smile so much at the thought that there really can be such fixated people as him
    • deannatrois
    • By deannatrois 3rd Dec 17, 12:46 PM
    • 4,910 Posts
    • 6,875 Thanks
    deannatrois
    I think this thread is one to give up on if the OP thinks the 400 rent income is profit (not taking off what he has to pay on his mortgage, interest, renting costs etc). Something not right here.
    • getmore4less
    • By getmore4less 3rd Dec 17, 2:07 PM
    • 30,771 Posts
    • 18,381 Thanks
    getmore4less
    The property is in Scotland and is therefore not leasehold. Nor is there any ground rent as someone else suggested earlier.
    Originally posted by Pixie5740
    factor fees very common.
    • getmore4less
    • By getmore4less 3rd Dec 17, 2:10 PM
    • 30,771 Posts
    • 18,381 Thanks
    getmore4less
    I think this thread is one to give up on if the OP thinks the 400 rent income is profit (not taking off what he has to pay on his mortgage, interest, renting costs etc). Something not right here.
    Originally posted by deannatrois

    Could be a crashy type pretending to be a dumb landlord to show how landlords are subsidising renters nd there i no money in this renting out property game.
    • Pixie5740
    • By Pixie5740 3rd Dec 17, 2:30 PM
    • 11,196 Posts
    • 15,643 Thanks
    Pixie5740
    factor fees very common.
    Originally posted by getmore4less
    Q) What do factoring fees have to do with leasehold properties or ground rent?

    A) Nothing

    As for factoring fees, the use of factors varies greatly depending on geographical location. For example, buildings are more likely to have a factor in Glasgow whereas in Aberdeen it is very unusual to have a factor unless you have a new build flat.
    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.
    • 00ec25
    • By 00ec25 3rd Dec 17, 2:38 PM
    • 5,558 Posts
    • 4,952 Thanks
    00ec25
    I think this thread is one to give up on if the OP thinks the 400 rent income is profit (not taking off what he has to pay on his mortgage, interest, renting costs etc). Something not right here.
    Originally posted by deannatrois
    please define "profit"

    - taxable profit?
    - cash left over after all payments have been made?
    - reduced amount still needed to pay towards mortgage after all other costs have been paid?

    OP has several times pointed out that having a cash contribution from a tenant towards his mortgage capital repayments cost is, in is eyes, a positive. Yes we all agree that if that means the OP still has to make up a shortfall on his mortgage payment the economics of his situation do not make financial sense, particularly if, because of the taxation of higher rate taxpayers, he's also had to pay out tax on a negative cashflow.

    Nonetheless, he is, as Crashytime so detests because he can't do it himself, having someone else "pay off" or at least "pay down" his mortgage.
    Last edited by 00ec25; 03-12-2017 at 2:40 PM.
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