Renting my house on a consent to let - Do I have to pay income tax?

VIGILANT22

Yes but you have to understand what they are!

G_M

And don't forget Capital Gains Tax when you sell. This is not your home anymore! You need to do a lot of research. Buy a good book on Letting eg Tessa Shepperson's or similar, and consider joining the RLA (tax deductable!).

Theogirl_2

Yes you have to pay income tax on any profit after you have deducted expenses. But most importantly even if you make no profit you must register with HMRC for self assessment and fill out a tax return every year.

ahfh1

G_M wrote: »

And don't forget Capital Gains Tax when you sell. This is not your home anymore! You need to do a lot of research. Buy a good book on Letting eg Tessa Shepperson's or similar, and consider joining the RLA (tax deductable!).

Good point, although I won't have any CGT, as due to market conditions, the house is on the market for a lower price than I bought it for. Not too upset though as I understand that's the way the market is at the moment.

ahfh1

Theogirl wrote: »

Yes you have to pay income tax on any profit after you have deducted expenses. But most importantly even if you make no profit you must register with HMRC for self assessment and fill out a tax return every year.

I'll do that. I don't have any qualms about paying tax - just needed to know if I had to pay it or not. Thanks.

new_home_owner_3

Theogirl wrote: »

Yes you have to pay income tax on any profit after you have deducted expenses. But most importantly even if you make no profit you must register with HMRC for self assessment and fill out a tax return every year.

You may have to pay income tax but if its less that 2500, which it sounds like and you get paid by paye they can alter your tax code and take it from your monthly or weekly wages.

CLAPTON

ahfh1 wrote: »

Good point, although I won't have any CGT, as due to market conditions, the house is on the market for a lower price than I bought it for.

there is no cgt on your principal residence in any case.

rl290

The income is taxable, but there are deductions that can be made. There is a good guide to these on HMRC website. Briefly, any costs involved in renting the flat out except those that increase equity (repayment part or mortgage) or increase value (changes which are improvements rather than just routine maintenance). Also, you have a choice: you can either deduct 10% of net rent as a wear-and-tear expense, OR just deduct what you actually pay for. If the property is in good condition, then go for the 10% net rent. As an example:

Suppose I rent a property for £100 a week and it is rented out for 50 weeks this year. The tax calculation would be:

£100 x 50 = 5000
Less mortgage interest: -4500
Less advertisment costs: -100
= actual profit of £400 (assuming no maintenance costs)

Less 10% of rent: -500
= tax profit (loss in this case) of -£100

You have made a real profit this year, but accounts show a loss for depreciation, so you can offset this loss against other income this year.

As others suggest, a good accountant can be useful

R

00ec25

rl290 wrote: »

but accounts show a loss for depreciation, so you can offset this loss against other income this year.

wrong - losses arising from property rental business cannot be set off against any other income (eg your salary).
All you can do with a loss is carry it forward to next tax year and then offset it against property related profits only, hence the need to declare your income to HMRC so you can register the loss for use against future years

joolley

ahfh1 wrote: »

Hi,

I have just bought a house, but have not yet sold my old home.

Seeing as the housing market still has not picked up yet in my area, I have decided to rent out my new home for 1 year whilst I sell my old home (in which I will stay in and keep it looking spic and span). I also decided not to move into the new house because it's in an area that is in high rental demand. You could say I have become one of these 'accidental landlords'.

I have obtained a consent to let on the new house. However, do I have to pay income tax on the income? The rental income just about covers the mortgage and agency fees, so I'm not making any profit.

Thanks

I am often wrong. And I have got used to being wrong. But, I find it unbelievable that you have 'suddenly' realised that you will not move into your new house got on a residential mortgage, that just happens to be in an area of good rental yield. Plan all along, perchance? BTL by the back door? Funny that. Most folk would move and rent the old house that they don't want anymore while it's on the market. have you got permission to let the new one? How bizarre?

But I may well be wrong. I often am. Oh, I said that already.