Can't sell flat, no choice but to let it, tax issues... :(

brooky_agb

Hi,

I've got a 1 bed flat with no mortgage. We have found a house we want to put an offer on but we have no idea what to do with the flat we have failed to sell.

1. Do we let out the flat and use the income to offset against the mortgage on our new house.
2. Do we get a buy to let mortgage on the flat & a mortgage on the new one.

I own my own company and have self assessment to do every year. Should I put the flat in my partners name to avoid tax?

We have no idea what to do.. everyone seems to tell us something different. Is there a tried and tested solutions? Thousands of people must have this dilemma.

mustang1

You need to ask yourself why you have failed to sell your flat? Is it overpriced? What do estate agents say? This is clearly something you need to work out at some stage otherwise you'll never sell it!

Trollfever

These are the earlier replies:

http://forums.moneysavingexpert.com/showthread.html?t=1478013&highlight=

brooky_agb

I live in a major commuter town of London 300 yards from the main line rail way station. There are only about two properties on the market less than mine needing modernization. It's immaculate.... Had load of viewings and a handful of ridiculous offers.

I'm at my wits end. Got a substantial deposit for a new place but feel trapped. Does anyone have any useful advice? HSBC told me they won't let me have two mortgages. I can't even give this damned flat away.

silvercar

Do you need the money from the flat as a deposit for the new place? If so then you will need to get a BTL mortgage on it to release some equity.

If you have a deposit saved elsewhere then it would be cheaper to take a larger mortgage on the new place than a BTL mortgage and a residential mortgage as (a) BTL mortgages are more expensive and (b) only one set of arrangement and valuation fees.

Worry about the tax sitaution once you have worked out that you can afford to keep the flat and buy the house and that you have enough income to get the mortgage you want on the new place.

silvercar

cross posted.

Why have HSBC said no? Is your income sufficient to justify the mortgage on the new place?

If you have a good credit rating and an income sufficient, others will say yes to a mortgage. It is usually recommended that you have the BTL mortgage with a different lender to the residential one.

brooky_agb

Thanks for getting back to me silvercar I really appreciate it. We don't need to get the equity out of the flat to buy the new place. I earn more than my partner (we are not married yet) so we are thinking of letting it in her name so that she gets the rental cheque. She doesn't have to do self assessment as she has a normal full time job. I am self employed.

*Cross posts* - yes HSBC said I can't have two. Maybe the advisor was confused (or me!). We could get a guy to let with someone else.

00ec25

brooky_agb wrote: »

so we are thinking of letting it in her name so that she gets the rental cheque. She doesn't have to do self assessment as she has a normal full time job. I am self employed.

you must report the "profits" to the tax office and she will either have a code adjustment raised on her or will have to do an SA - read here under reporting profits to your tax office:
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10013435

G_M

00ec25 wrote: »

you must report the "profits" to the tax office and she will either have a code adjustment raised on her or will have to do an SA - read here under reporting profits to your tax office:
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10013435

It's not 'profit', it's taxable income. I say this as there have been several similar threads here with people claiming that as they pay rent elsewhere they are not making 'profit' from the property they let out.

One or both of you will need to declare the income, though mortgage interest and other expenses are offsetable (an arguement for getting a mortgage on the property you let out)

brooky_agb

Thanks folks. I've been reading direct.gov.uk which is very useful. I'm expecting to have to pay approx £30k in personal tax this financial year 09/10. I terrified of the tax man and wouldn't dream of breaking the law. I expect that if my partner takes the income from the flat and adjusts her tax code or does self assessment then she would be paying less tax than I would so it looks like that's our only option.

Does anyone else do that? As the property is in my name is it me who has to cash the rental cheque?

dopester

brooky_agb wrote: »

It's immaculate.... Had load of viewings and a handful of ridiculous offers.

Lets hope in 2 years time you don't look back and see them as ridiculously good offers.

An education might be coming for some.