Tax implication of buying home and renting out another

marymak1

Hi,

I'd appreciate any advice/guidance. I currently own a small property outright with no morgage on it. Several months ago I put it up forsale and like the majority of other houses on the market it hasn't sold. I need to buy a family home so am considering letting out the property I own and buying a house with a morgage and savings I have. A friend adviced me that I would be better off morgaging the property I currently own in order to offset tax. She has told me that if I rent out the property I currently own with no morgage then the tax man will deem that any rent is profit and tax me accordingly, but if I morgage the property then the tax man will take the morgage payment into account and will not tax me as the rent would equal the morgage payment. I am a tax payer. Is my friend correct - I am so confused! Any guidance would be appreciated.
:j

Gorgeous_George

That is not true.

You can offset the interest (upto the value when you start letting the property) regardless of which property the loan is secured against. Speak to a tax adviser to confirm.

I would make sure I had the (BTL) property valued by three valuers in case the taxman asked for evidence.

Landlordzone is a good site for questions such as this one.

GG

GG

silvercar

Government advice on tax and record keeping for landlords:

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017814

marymak1

Thanks for your reply guys - much appreciated.

I was beginning to panic. You are little stars!:j