Rental Tax Query.

Emmaf

Hello,

I understand that when renting a property you pay income tax on profits.
I am working a couple of hours from my home and commuting at weekends. Starting to take it's toll and considering renting my house and releasing a small amount of equity to purchase a small flat in my work town.

Can anyone tell me if I release equity on my mortgage, when I am doing my income tax return can I include this as part of the mortgage?

Example:
House mortgaged at £90k

Current mortgage £260 per month
Rates: £60 per month
Letting agent fee: £60 per month
Landlord Insurance: £30 per month
Mortgage Insurance: £40 per month
Total: £450 per month

Rental income: £525 per month
Therefore profit: £75 per month

To release £25k equity, I will have a further advance loan of £179 per month. Can this be included on my annual tax returns for the property?

Would appreciate if anyone knows,

Thanks,

Emma

lr1277

You will have to let your mortgate provider know that you are renting your property out.

Also from an income tax point of view, only the interest portion of the mortgage payment can be deducted from your rental income.
But you can deduct 10% of your rental income as a wear and tear cost.

Don't know if you can deduct mortgage insurance from your rental income. I think you can deduct buildings insurance, but again, I am not sure about this.

I am speculating but you may have to pay tax on the capital appreciation on your house whilst it is rented out.

Suggest you get more advice.

HTH

Emmaf

Thank you.

I have spoken to my mortgage provider and they led me to believe the consent to lease won't be a difficult one to sort, so that part should be grand.

Just wondering if the further advance will be taken into account when filing tax returns....can anyone point me in the right direction?

Incidentally, I'm hoping to apply for the further advance before applying for the cosent to lease.....but thats another point entirely.

Emma

lr1277

I am not an expert but I wouldn't think so.

Surely the further advance is between you and your lender. I don't see how that would impact your personal income or wealth.

But the interest portion of the whole mortgage payment is tax deductible.

You could ask the Inland Revenue.

Or you could try websites such as this one:
http://www.taxationweb.co.uk/1-minute-guides/property-tax/tax-on-rental-income.html

lr1277

The following article whilst a little old seems to have relevant information with lettings in general, though not your specific query:

http://money.scotsman.com/scotsman/articles/articledisplay.jsp?article_id=991512&section=Tax&prependForce=SM_

silvercar

The interest on the mortgage upto the value of the property when first let is an allowable expense against rental income.

Other expenses directly concerned with the letting are allowable. This includes, building insurance, gas safety certificate, maintenance.

Emmaf

Thank you so much for all that information. Very helpful and gives me a good idea where to start.