Renting out my Flat - Tax Help!

chucknorris

tbs624 wrote: »

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.

I would second that, it isn't particularly expensive and it's especially great value for an inexperienced LL as you are almost certainly going to benefit from your membership, it will be money well spent.

sequence

500 a month interest only ? Must be some property, are you sure you could cope if it were trashed ?

bristol_pilot

You can offset mortgage interest against the rent. Provided you still then have some taxable rental income you can deduct 10% as an expense for wear and tear. However, what you cannot do is offset the wear and tear allowance against non-rental income e.g. from employment. In your case, if the rent is £500 and mortgage interest is £500 there will be no tax to pay.

neverdespairgirl

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?

Of course you'll be making a loss.

Income (max) - £6000 a year

Outgoings (min) -

£6000 a year (mortgage)
£X (service charge)
£X (ground rent)
£X (insurance)

and then you either run the tenancy yourself, or pay an agency to do it. And you have to maintain and repair everything yourself.

That's if all goes to plan. the outgoings rise a lot if the place gets trashed, the income falls if your tenants don't pay, do a moonlight flit, etc.

jockosjungle

If the interest is that high, surely you can charge more in rent. You're not renting it to someone you know are you?

The losses you can carry forward and offset against future property income profits, however this venture seems like a terminal loss maker so its largely irrelevant.

R

katkins7

Thank you for replys.
As I am moving in with my partner I will be better off as I will have no mortgage / rent to pay as such as the rent from my property will cover that, and nothing to pay at my partners. I am not renting my property as a business but because I dont want to sell at present because of the property market, but do want to live with my partner.

I pay no service charge or ground rent where I live. I take on board the fact that yes I would need money aside for repairs / maintenance, and that my insurance payment will increase to cover the property as a letting. Possibly I could try to rent out at £530 but in the area I live in any higher would make it unrentable. I could then deduct these cost?

I'm assuming that if I rented at £530 and my interest only mortgage was £500 per month ,the £30 would be profit and taxable? Could I then deduct 10% wear and tear from this? Is this something you do it the end of the tax year?

Jowo_2

How do you propose to pay off your mortgage if the rental doesn't cover repayment of the capital?

It only takes a short void of a few weeks or a minor repair or an increase in mortgage interest rates to tip you into a loss. Dodgy tenants love a novice landlord so if you end up with a 'pro' tenant because your marketing and screening is poor, you'll get the property back trashed and without a penny's rent many months after you hand over the key and after you've spent a fortune on legal fees to evict them. If you appoint a dodgy agent, the same thing could happen.

Well priced properties do sell in most areas.

00ec25

katkins7 wrote: »

I'm assuming that if I rented at £530 and my interest only mortgage was £500 per month ,the £30 would be profit and taxable? Could I then deduct 10% wear and tear from this? Is this something you do it the end of the tax year?

you deduct all the costs you as LL incur as part of the calculation , you do not simply choose which deductions to make each year , you must do a full declartion of all costs each year in letting out the property .

in respect of wear and tear you deduct £50 (ie 10% of £500) from your gross rent ONLY if it is a FULLY furnished property - part furnished does not count

thus at a minimum your costs are:

mortgage interest element only £500
wear and tear allowance £50
LL annual insurance £x??
LL annual gas safety certificate (if you have gas?) £x?
annual water rates £x
one off cost of EPC £x
one off costs of vetting tenant (or monthly costs of using an agent)

(I assume you will get the tenant to pay council tax and gas/eletric usage)

in summary the flat will be costing you money to keep on in the vague hope that property proces will recover, the only positive is you will not be paying any income tax given the finances you are talking about at the moment

jockosjungle

Doesn't sound like much of a goer to me, in a best case scenario you are making a small annual loss which you cannot offset against anything, you may not be paying any tax on profit but that's the least of your worries if you are running a loss making business.

You can only have wear and tear allowance on furnished properties, not part furnished ones.

Unless you are DIY man, everything that goes wrong in the flat will be your costly responsibility, if the flat is empty you still pay the bills and mortgage interest.

you'll also need permission to let (may well not be given) and you need to go on a B2L mortgage at a worse rate than you are probably on with a 25% minimum deposit

R