Renting out my Flat - Tax Help!

katkins7

Hi,

I doubt there is a clear answer to this (Tax is never easy!) but could do with a few tips, please : )

I am thinking of renting out my 2 bed flat, part furnished. I have an interest only mortgage on it.
Assuming the mortgage company are happy for me to do this, and I speak to insurance company to make adjustments with the cover. My flat is leasehold so will also advise the leaseholder - he should be fine as other flat owners have done this there.

So my question - If I was to rent it for £500 per month (£6,000 per year) and my interest only mortage is £500 per month, can i deduct my interest only mortgage payments of £500 as an allowable expense when working out my tax?

I understand what the other allowable expenses are building/contents insurance, repairs/maintenance, letting agents fees etc but this part has foxed my a little!

Any answers would be gratefully recieved!!!

N79

Correct (10 char)

Jowo_2

Yes, the interest only part of a mortgage, plus insurance, repairs, agent fees are tax deductible. The landlordzone website and HMRC websites have good info on tax for rental properties.

But why are you letting out your property for a loss in the first place?!

chucknorris

katkins7 wrote: »

Hi,

I doubt there is a clear answer to this (Tax is never easy!) but could do with a few tips, please : )

I am thinking of renting out my 2 bed flat, part furnished. I have an interest only mortgage on it.
Assuming the mortgage company are happy for me to do this, and I speak to insurance company to make adjustments with the cover. My flat is leasehold so will also advise the leaseholder - he should be fine as other flat owners have done this there.

So my question - If I was to rent it for £500 per month (£6,000 per year) and my interest only mortage is £500 per month, can i deduct my interest only mortgage payments of £500 as an allowable expense when working out my tax?

I understand what the other allowable expenses are building/contents insurance, repairs/maintenance, letting agents fees etc but this part has foxed my a little!

Any answers would be gratefully recieved!!!

You are also allowed to deduct 10% of the rent as an allowance for wear and tear (for furnished properties). This might not seem important as you will be claiming a loss, but you can carry this loss forward to profitable years and offset it against tax then.

N79

chucknorris wrote: »

You are also allowed to deduct 10% of the rent as an allowance for wear and tear (for furnished properties)

No - its an either / or not an also. You either have the 10% allowance or you deduct actual costs (eg of repairing oven / tables). You can not do both.

chucknorris

N79 wrote: »

No - its an either / or not an also. You either have the 10% allowance or you deduct actual costs (eg of repairing oven / tables). You can not do both.

I know, but you can claim the 10% and claim the maintenance to the property (as opposed to the furniture etc). In my experience the 10% for wear and tear is quite generous and represents better value to elect to claim rather than actual repairs to those items that would otherwise not be claimable.

katkins7

Im letting the flat out as moving in with my partner rent free.
Would it be letting at a loss if the rent payments were the same as the interest only morgage payments?
As long as my mortgage is covered and I can claim back 10% against rent to cover any wear and tear it seems OK. I know my building/contents insurance might increase alittle but nothing too major.

I was considering a letting agent to find a tenant but the fee of one months rent seems very high. I have heard that my local council can manage and rent the property for you. Anyone have experience of this?

FTBFun

katkins7 wrote: »

Im letting the flat out as moving in with my partner rent free.
Would it be letting at a loss if the rent payments were the same as the interest only morgage payments?
As long as my mortgage is covered and I can claim back 10% against rent to cover any wear and tear it seems OK. I know my building/contents insurance might increase alittle but nothing too major.

I was considering a letting agent to find a tenant but the fee of one months rent seems very high. I have heard that my local council can manage and rent the property for you. Anyone have experience of this?

Unfortunately you can't "claim back" 10% wear and tear - it is a straightforward deduction set against rental income.

If you do end up with a loss after deducting mortgage interest, other expenditure and wear and tear, the loss is carried forward and set off against future rental profits. You can't deduct it against your other income i'm afraid.

RAS

Hi

You need landlords' insurance, a gas certificate, Energy performance certificate, fees to agents.

Your lender may require you to re-mortgage or to pay a higher rate.

Most landlords assume they need 125% of the mortgage payment to make a profit and some lender refuse permission unless this is possible.

tbs624

Google HMRC Property Income Manual. It has all the information you need

tbs624

If you are only intending using an agent as a tenant finder, are you intending to manage the actual let yourself? If so, you may wish to join the NLA/RLA/LLLaw - much guidance and support for inexperienced LLs, membership fee tax deductible and discount on your LL insurance premiums.