Tax implications of renting out my house.

smartn

Due to current market conditions I may be in the position where I need to rent a house, and also at the same time rent my own house out to someone. Could someone please explain what tax implications there may be.

m_13

Any rent you receive is counted as income. If you own the house in only your name then this will be taxed at your highest rate of income tax. If the house is owned as 'joint tenants' with another person then the income will be split 50/50 between you and half taxed at the highest rate of each person. If you own the property as tenants in common then each person will be taxed on the percentage they own at their highest rate.

So if you income was £500 a month and you and a partner owned the property as joint tenants then you would each have £250 income from the property. If you owned the property as tenants in common and one person owned a 25% share they would have £125 income and the other person who owned a 75% share would have £375 income. BTL properties are often bought this way so that the larger share is owned by the lower rate tax payer.

You can deduct certain costs against the income. For example, if there is a mortgage secured on the property then the interest paid each month is normally deductable. You can also deduct any agent fees (for example, for a managed service) and utility bills and council tax whilst the property is empty.

You might be better looking at the guides on www.landlordzone.co.uk. Their forums are also pretty good. You need to keep really good records of what you spend and the income you receive.

smartn

Many thanks for that. Has confirmed what I though would be the case (wonder how many people don't declare!!). Will take a look at the link now.

m_13

I've seen posts on the tax forums where people have been renting out for 10 years and the taxman has caught up with them and is asking for all the tax owed plus the late payment fines

I just wouldn't risk it. If you aren't already doing self assessment then you need to get yourself onto it. If you are doing self assessment then you fill in the other property form. I believe if your rental income is less than £15,000 per annum then you only have to fill in three boxes.