First time as a "landlord" - advice needed, please!

fraggle7581

Hi lovely peeps

Please can you help me with this tax conundrum:

My boyfriend has just moved in with me, and is about to let his house out via a professional agent. His monthly mortgage repayment is £510, however the agent suggested a monthly rental price of £495. Obviously he will have to pay the £15 difference, but there's also the agent's fee taken from the rent. Technically, my boyfriend isn't making any money, so is he still liable to pay tax on the rental "income" he receives?

Also, the money he's spent to get it in a rental-able condition (i.e. paint, carpet, etc) which he still has the receipts for - how do they come into the tax equation?

I'm completely clueless so any advice would be great!

Thank you

Sian

silvercar

any mortgage interest can be set against income, so you only pay tax on the profit you make.

randan

Option 1
The mortgage is interest only then as he is making a loss then he will not have to pay any tax.

Option 2
If it is a repayment mortgage then as mentioned only the interest element of this is deductable and the repayment amount would be taxable.
e.g.
Total Mortgage Payment £510 made up of £200 interest and £310 paying off the loan. This gives £2400 interest per year which is deductable.

Rental of £495 less 12% for the management fees leave income of £435.60 per month = £5227 approx per year.


Tax would have to be paid on £5227 - £2400 which is £2827.

He would of course be allowed to deduct some other expense from this which are referred to elsewhere on the forum.

realwildone

What about repairs, voids etc. Why help someone pay their rent. Sell the flat and pocket the difference.

meanmachine_2

zaichornok wrote:

My advice is don't declare the rental income then your boyfriend wont have to pay tax on it. The tenants have already payed income tax on that money !!!!!
That's one silly answer, but ceretainly the way I would do it.
The other way is - pay the tax. Your boyfriend is on a winner anyway, beacause someone else is paying the bulk of his mortgage - even if its only 60% of it. How bad can that be?
Those are his choices.
zaichornok..

Is there a button to "unthank" someone?

What an idiotic post.

BobProperty

zaichornok wrote:

My advice is don't declare the rental income then your boyfriend wont have to pay tax on it. The tenants have already payed income tax on that money !!!!!
That's one silly answer, but ceretainly the way I would do it.
The other way is - pay the tax. Your boyfriend is on a winner anyway, beacause someone else is paying the bulk of his mortgage - even if its only 60% of it. How bad can that be?
Those are his choices.
zaichornok..

So you just declare your HB tenants and not the others?

To the OP, you are unlikely to be making any profit on this arrangement, so don't worry about the tax as there won't be any payable. But do send in a tax return and tell the tax man. Unlike some people apparently.

BobProperty

meanmachine wrote:

Is there a button to "unthank" someone?

What an idiotic post.

I've been after a "Slapped" button for months.

nelly_2

BobProperty wrote:

I've been after a "Slapped" button for months.

Ive been after a super model and seem to be having the same luck as you

dunstonh

Is the mortgage on capital and repayment basis or interest only? check randans post above for why but let us know which anyway.

BobProperty

nelly wrote:

Ive been after a super model and seem to be having the same luck as you

I'd change that avatar for starters then.....:rotfl:

I think I'll start a campaign for a "Slap" and an "Unconvincing" button. Then you could look at a poster and see their track record, e.g.:
Thanked 110 times in 104 posts
Slapped 57 times in 2 posts
Unconvincing 167 times in 34 posts

clutton_2

you can claim a great many expenses against any profit - some (such as Solicitors and brokers fees etc to buy the house) can only be claimed when you sell (so keep ALL receipts). If you contact the Inland REvenue, they used to do a booklet called "Taxation of Rents" (it has however, been re-written recently) and this is not easy reading !!

you can claim, (amongst others ) travel expenses to the property, cleaning, repairs, CORGI gas inspections (compulsory - i hope you have had one done !), insurances etc. As you are now running a BTL business, you can claim one room in your home as an office, and claim 1/6th (if you have a 6 room house) of the power and light/community charge. You can also claim the cost of a computer to run the business, software, telephone calls, letting agent fees, professional body membership fees - and on and on. Anything which you spent which is directly on behalf of the business. There is a difference however between "Capital" expenditure and day to day expenditure. You really need to talk to an accountant, as he will save you money. If you eventually manage it yourself you can claim a lot more than if you are paying a letting agent !!! You can talk to the IR - they are usually quite helpful, but, do get to talk to an inspector who specialises in property business, as it is a very complex area in tax terms.

good luck


re "not paying tax" - the IR know you have bought a house, (SDLT form tells them ) so they can check up on you !!