Letting Own Property - Few Questions

mac123

Hi

We are moving out of our home and buying a new property to live in. We don't want to sell the property as we've only had it for a year and are planning to rent it out.

My main question is how do you go about declaring this income and what things can you offset against this liability. Will it be charged at standard income tax rates???

Cheers in advance

rosysparkle

You declare the income on your tax return (if you don't get one, you need to call the tax office and ask for one). If the property is owned jointly, you will each need to declare the share of the income on your tax returns.

Any expenses wholly and exclusively incurred as a result of the letting, and are not of a capital nature, can be offset against your tax liability. So for example agents fees and the associated VAT, the cost of insuring the let property, the cost of the annual gas check, and repairs can be claimed; as can the interest on a mortgage on the let property. You can claim an annual wear and tear allowance of 10% of the annual gross rent or you can claim the cost of renewing furniture and fixtures, but not both. You can only claim for replacements, not improvements to the property. (You can replace single glazed windows with double glazing and claim as a replacement, though).

Your net income from property is taxable at standard rates, so how much tax you will pay depends on the level of your taxable income from other sources.

There is a lot of help available on the HMRC website: http://www.hmrc.gov.uk//manuals/pimmanual/index.htm

stphnstevey

Is wear and tear only if it is furnished?