Tax on rental income

mr_whitey_2

I am after some advice regarding tax on money i am recieving from letting out a house.

The house is not up for rent to make a profit (The rent received is less than the monthly morgage payment) and i was wonding what the rules are on this? Do you still have to declare this even though it is not making me any money?

Thanks in advance for any advice you can give me.

happyrichard

Afraid so. You may not be earning, but you are renting it out and getting some income (even though it does not cover your costs).

You will need to add this amount of income to your other income from salary/ interest/ dividends and then tax it as if it is non-savings income (like salary), i.e. at 10% and then 40% if higher rate...

Hope that makes sense.

theartfullodger

The house is not up for rent to make a profit

- Is this because you are renting it out at below market rent??? If so Tax man may decide to tax you on what they think the rent should be...

Yes, tell tax man (now ) even if tax return not due until next year - they don't like thinking someone is hiding things from them: You''ll need to do the 2-page property tax return along with the rest of the annual self-assessment tax stuff (unless you affairs are very very complicated). If you don't tell 'em, chances are someone else will..

Get Carl Bayley's book on "How to avoid Property tax". btw there at least 9 different taxes a Landlord can have to pay...

Expense against rental income as regards mortgage is only for the interest portion, not the capital repayment. There are many other expenses legitimately available to use...

Cheers!

Lodger

ellies_angel

My understanding (please correct me if I'm wrong) is you only pay tax on the income after the interest and expenses. so for example.

I receive £425 per month from my letting agent for renting out my house. Total amount received annually. £5010

My morgage payments are annually £7176 of which aprox £4300 was interest leaving a balance of £2876 which is taxable.

In addition to that I pay £48 per month to British Gas who look after my heating, electrics, pumbing drains and appliances total £576 and Landlord Content and Building Insurance £240.

Deducting the above two from the balance and providing nothing drastic happens to my house so should not need to fork out anything I would be paying tax on £2060.

I do hope I was right in my understanding. This is only my first month renting out my house so have plenty of time before my tax return due. (also self employed so am quite happy to do my self assessment).

(I am renting it out at the market value, this is the sum I receive after I have paid the letting agents fees)

hells_2

have a look on Landlord Zone forums, they're very knowledgable on there.
As far as I know, you are taxed on anything over and above the costs, i.e. mortgage interest and not sure about insurances and managing agents fees.
But as I'll have to file a return on this myself next year, I best get looking! Good reminder for me

EdInvestor

Agents fees are claimable as are repairs, 10% wear and tear if the flat is furnished, service charges and ground rent, mortgage interest.Few landlords with mortgages pay tax.HMRC may not require you to do a return more than once.

wannaberich1

We rent out our flat and know that because what we're earning is below a certain threshold we have to fill out a form and not a tax return.

have a look on the direct gov website, we got a lot of helpful information from there and also our local tax office.

WB1

Premier_2

ellies_angel wrote: »

...
My morgage payments are annually £7176 of which aprox £4300 was interest leaving a balance of £2876 which is taxable...

I hope you mean your rental income is £7176

What your mortgage payments are is irrelevant.

Tax relief is on interest, not capital repayments.

tbs624

If you are serious about making a success of letting out property the time to have checked up how it works vis a vis HMRC was right at the very start.

Google PIMMANUAL and SA105 help pages

Join a national LL association (membership fees tax deductible)

theartfullodger

Ellie said...

I receive £425 per month from my letting agent for renting out my house. Total amount received annually. £5010

My morgage payments are annually £7176 of which aprox £4300 was interest leaving a balance of £2876 which is taxable.

Ellie - if you declared this to taxman you got the numbers wrong... taxable income from rent of £5,010 less mort. interest of £4300 IS £710...

Cheers!

Lodger

theartfullodger

(I am renting it out at the market value, this is the sum I receive after I have paid the letting agents fees

Er.. no, Declare full rent income before agent taxes his rake-off, then have agents charges listed as expenses...