Relatively new to being a landlord. tax question.

JimmyDeemo

After a post i made a while ago, it occured to me that i may have missed something when we started to let out our flat in terms of tax. We started to let out our flat in July, and i informed the tax office and they said i'm registered and i'd recive the appropriate documents when i needed them. Which i'm assuming is a tax return right? I think they said it would come in april (new tax year?), is the idea that i fill it out for this years tax? Now i've never done one before, would i be better getting an accountant to do it?

I have been keeping track of expenses (currently only one electrician bill), and i believe that intrest on the mortgage is deductable too. Now we aren't making any money on it, in fact we have to contribute to it so what does that mean in terms of taz. Anyway, if i have done anything really wrong i'd appreciate some tips, sorry for the complete lack of understanding i have on this matter. Thanks.

PasturesNew

We are in tax year 2008-2009. You will need to fill out a tax return for your BTL from July 2008 to end of March 2009, which will need to be completed by the end of 2009.

If you are having to top up the money to keep it going, then there will be no tax to pay. However, if you work and pay tax then you might even get a tax refund due to that loss.

It would be best to speak to an accountant because they know all the ins/outs and you say "we" so there are two of you and he might find a more tax efficient way of doing things. Also, the accountant fees are tax deductible, creating a further paper loss, and therefore a small tax refund too.

Mutton_Geoff

a small tax refund too

Only if you've paid tax in respect of this venture. Unfortunately unlike some other countries, you can't offset these tax losses against any other earned income (ie your day job). Sadly you are not allowed to offset any of the rental income tax negative against the CGT when you come to sell either. This government get you every which way!

zzzLazyDaisy

I might be wrong about this, so you'll need to check with your accountant - but as far as I know, unearned income (ie money from rents) is treated differently from earned income (ie salary). So if you make a loss on the rental property, you can't set that against tax paid on your salary, but you can carry it forward and set it against any profit made from renting the following year.

This is only from my own research and I'm happy to be corrected if I'm wrong.

silvercar

zzzLazyDaisy wrote: »

I might be wrong about this, so you'll need to check with your accountant - but as far as I know, unearned income (ie money from rents) is treated differently from earned income (ie salary). So if you make a loss on the rental property, you can't set that against tax paid on your salary, but you can carry it forward and set it against any profit made from renting the following year.

This is only from my own research and I'm happy to be corrected if I'm wrong.

Correct AFAIK.

JimmyDeemo

PasturesNew wrote: »

We are in tax year 2008-2009. You will need to fill out a tax return for your BTL from July 2008 to end of March 2009, which will need to be completed by the end of 2009.

Cool thats what i wanted to know.

So really right now i should be on the look out for a decent accountant who can sort this out for us (prev poster had correct assumtion as wife and i own the flat). I believe i have a cousin that lets out a few houses, might be best going on a recommendation for that.

When the prev poster mention BTL, i'm assuming buy to let there, ours is just a normal mortgage, does that matter tax wise?

Mutton_Geoff

ours is just a normal mortgage, does that matter tax wise?

You can only offset the interest on that mortgage against the rental income and you should let the lender know, you will need their permission (possibly fee earning for them).

In the short term, repayment is OK but long term as the capital reduces, so will the interest and therefore the tax advantage. At the other extreme, owning a place that you let outright with no mortgage interest exposes you to tax on almost all of the rental income.

silvercar

When the prev poster mention BTL, i'm assuming buy to let there, ours is just a normal mortgage, does that matter tax wise?

Tax wise, it doesn't matter at all.

Icey77

JimmyDeemo wrote: »

Cool thats what i wanted to know.

So really right now i should be on the look out for a decent accountant who can sort this out for us (prev poster had correct assumtion as wife and i own the flat). I believe i have a cousin that lets out a few houses, might be best going on a recommendation for that.

When the prev poster mention BTL, i'm assuming buy to let there, ours is just a normal mortgage, does that matter tax wise?

If you are reasonably confident of your abilities you can try getting a text book so that you can do it yourself. Osbourne do an excellent AAT (Association of Accounting Technicians) text book for personal tax which will give you the basics in doing your own tax return.

It costs about £18 (ish) and will be FAR cheaper than hiring an accountant who will only do what you can do with the aid of a text book. If you have any further queries just call HMRC, I ahve always found them to be really helpful and will give you a concise and understandable answer.

rumncoke

Hi, I am renting out my old house as sale fell through at last minute. It was not a BTL purchase. I lived in it for 10 years before moving to my current address in June.

I have got a £25K interest only mortgage on it. (deposit for new house which was supposed to be paid back when sold) Am I right in thinking that I can offset the interest against tax.

IWantToBeFree_2

You can offset it against the rental income, which is subject to tax, not the tax.