First time landlord - tax and mortgage questions

fluffymuffin

Hi
I am potentially going to be going to work abroad for a year as of next March time. I don;t want to sell so would be looking to rent out my house.

How do I work out how much tax I would pay on any rental income? I rent out a room now but its below the threshold on the rent a room scheme so I don't pay any.

Secondly....do I have to change my mortgage to a buy to let or anything or can I keep going with the existing product. I don't want to have to pay any early repayment charges.

I suspects I'll have a gazillion more questions so any other wissom about renting out would be much appreciated too as I have no clue.

Thanks everyone

Euphoria1z

youll need to ask your lender for consent to let, its up to them whether they let you rent it out for a while, or whether they ask you to change to buy to let.

you will need to fill out self assessment tax return and inform them your getting rental income, then you pay tax on rental income (minus interest on mortgage and other legitimate expenses)

chucknorris

As a rough guide (off the top of my head):

Rental income

Less
10% of rent received for wear an tear (for furnished)
mortgage interest
gas safety certificate
insurance (service charge if not freehold)
letting agent (if used)
any maint/repairs
misc. expenses (tel/postage/advertising/additional keys etc)
any counci tax/utilities during a rental void (tenant pays when rented)
membership of NLA/RLA/similar (worth doing especially if inexperienced)
any professional services (ie accountant although it isn't difficult to DIY)

= taxable income at your appropriate rate

Not only notify your lender (for permission) but also your property insurance as any claim could be avoided if you have not informed them

fluffymuffin

ooh thanks. I won't be in the UK and won't be paying UK tax (will be in the UAE for a whoole tax year). Is there a tax free allowance of income like for wages that I won't be taxed on - I'm not sure if it works in the same way.

Thanks

mlz1413

you need a uk address for the tenants to contact so you will have to use an agent if you will be abroad, you might be best getting a guarnteed or full management service as you won't be able to organise repairs very easily from UAE.

I think only your earnings outside the UK are not subject to UK tax, as the rental will be in UK you will have to pay - if you make a profit.

elfen

Fire alarm things and a fire blanket/extinguisher in the kitchen - so if the unthinkable happens and one of the tenants sets something on fire they have a chance of putting it out.

Also, give them a contact number/address in the UK (say a relative or close friend) who would be able to go round if necessary (if there's any problems or complaints) and so you have a point of reference in this country if things go wrong.

00ec25

mlz1413 wrote: »

only your earnings outside the UK are not subject to UK tax, as the rental will be in UK you will have to pay - if you make a profit.

absolutely you must pay UK Income Tax - if you make a profit on your rental of course

also you must discuss this HMRC as you could possibly fall under the non resident landlord scheme .
http://www.hmrc.gov.uk/CNR/nr_landlords.htm

that means resident in the tax sense - there is a whole raft of things covered by the NRL scheme, not the least being that your tenant may have a legal duty to deduct 20% tax from the rent they pay you and pay it direct to HMRC themselves, unless you have sorted out your UK tax position with HMRC in advance of you going away.

there was quite a nasty thread on here a month or so ago from a tenant who was doing just that to her LL, the LL needless to say was :mad:

bobby-boy_2

elfen wrote: »

Fire alarm things and a fire blanket/extinguisher in the kitchen - so if the unthinkable happens and one of the tenants sets something on fire they have a chance of putting it out.
/QUOTE]

I agree about the smoke alarms BUT not about the fire extingusher, that would encourage a tenant to possible tackle a fire they were not trained to deal with! Imagine discharging a fire extinguisher into a chip pan fire. If your not fire trained then raise the alarm and retreat to safety end of story.

If your listing required stuff you forgot to mention gas safety certs EPC certs Deposit protection etc.

tbs624

mlz1413 wrote: »

you need a uk address for the tenants to contact so you will have to use an agent if you will be abroad.....

It doesn't have to be an actual LA, merely anyone who can acts as your agent , so as Elfen says it could be a friend or relative (clearly whoever it is needs to be familiar with the legal responsibilities of a LL)

tbs624

fluffymuffin - have a look here http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/index.htm

and see also http://www.hmrc.gov.uk/manuals/PIMMANUAL/Index.htm

N79

I would also doubt that you will actually achieve true non resident status (for tax purposes) if you are only abroad for a year. At best you are likely to be fully resident for one year and get split treatment for the other.

Yes you will still get a personal allowance.