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Rental income question
daresaints
Posts: 8 Forumite
The credit crunch caught me out big time as to secure a new build property I had signed the missives within the 14 day period requested by the builder (Persimmon-Scotland). I then couldn't sell my own house, tried to pull out but couldn't and things were getting very messy. To cut a long story short I somehow managed to get out of the mess via a pretty expensive buy to let mortgage and this month a letting agent has managed to get someone in my old property.
Bottom line is that by the time I take into account cost of BTL mortgage, landlord insurance, gas maintenance,and letting agent fees I am showing a £240 deficit vs my monthly rental income. Never having done anything like this before, how does this leave me with the tax man ? Am i going to be further penalised by paying tax on my income or does the fact that I am actually making a loss work in my favour ?
Any advice on this would be welcome.
Bottom line is that by the time I take into account cost of BTL mortgage, landlord insurance, gas maintenance,and letting agent fees I am showing a £240 deficit vs my monthly rental income. Never having done anything like this before, how does this leave me with the tax man ? Am i going to be further penalised by paying tax on my income or does the fact that I am actually making a loss work in my favour ?
Any advice on this would be welcome.
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daresaints wrote: »The credit crunch caught me out big time as to secure a new build property I had signed the missives within the 14 day period requested by the builder (Persimmon-Scotland). I then couldn't sell my own house, tried to pull out but couldn't and things were getting very messy. To cut a long story short I somehow managed to get out of the mess via a pretty expensive buy to let mortgage and this month a letting agent has managed to get someone in my old property.
Bottom line is that by the time I take into account cost of BTL mortgage, landlord insurance, gas maintenance,and letting agent fees I am showing a £240 deficit vs my monthly rental income. Never having done anything like this before, how does this leave me with the tax man ? Am i going to be further penalised by paying tax on my income or does the fact that I am actually making a loss work in my favour ?
Any advice on this would be welcome.
Remember only the interest element of your repayments is an allowable expense for tax purposes.0 -
Only way I could afford the buy to let mortgage was via the interest only route. Does this mean i can claim money back via tax relief ?0
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The only 'benefit' of making a loss is that you can carry it forward to the next year's tax return.0
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Don't forget to register your new business with HMR&C.
You don't need to register your "business" with HMRC, you simply need to submit a tax return to declare the income and expenses from your venture, paying tax where due, or as sounds in this case, carrying losses forward.
Who knows, this could be good timing and with a couple of years of small losses which you've carried forward to offset against tax, then you could be impressing your friends at a dinner party in 5 years time with stories of how you predicted the bottom of the market ;-)
PS Any rental income losses carried forward can offset tax on income in future years but not against CGT when you eventually come to sell.
Good luck.Signature on holiday for two weeks0 -
Mutton_Geoff wrote: »
PS Any rental income losses carried forward can offset tax on income in future years but not against CGT when you eventually come to sell.
only rental income not earned income like PAYE.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
only rental income not earned income like PAYE
Quite correct, thanks for highlighting that. It's a shame as I made a loss on my BTL rental income but paid 40% tax on my earned income. It was not possible to offset several years of rental income losses against the BTL capital gain when I sold either.
This government gets it every which way :mad:Signature on holiday for two weeks0 -
Mutton_Geoff wrote: »only rental income not earned income like PAYE
Quite correct, thanks for highlighting that. It's a shame as I made a loss on my BTL rental income but paid 40% tax on my earned income. It was not possible to offset several years of rental income losses against the BTL capital gain when I sold either.
This government gets it every which way :mad:
Should have kept the BTL for future losses;)
The really rich guys buy things just to utilise their tax losses, or something similar (never really understood the detail).I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
Should have kept the BTL for future losses
The £50k capital gain was more valuable to me so I sold, at a rather fortuitous time it now seems :rotfl:Signature on holiday for two weeks0 -
Mutton_Geoff wrote: »only rental income not earned income like PAYE
Quite correct, thanks for highlighting that. It's a shame as I made a loss on my BTL rental income but paid 40% tax on my earned income. It was not possible to offset several years of rental income losses against the BTL capital gain when I sold either.
This government gets it every which way :mad:
You mean you want us taxpayers to give you even more favourable tax treatment.US housing: it's not a bubble
Moneyweek, December 20050
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