Inland revenue ??? How and what do I do

Polypops

Hi guys

I currently rent my house out although it is on a residential mortgage. I am in the process of getting a consent to let from my mortgage company.

I am also half way through buying another property but this time on a buy to let mortgage.

I would just like to find out what to do with the tavpx stuff. I'm in the army so I have never had to do anything with taxes, but I want everything above board.

Could anyone run me through the process of what I need to do in layman terms?

Both mortgages are on repayment and I pay
£320 with a rent of £450
The other one will be
£437 with rent of £395

Both are unfurnished! I do have the right landlord insurance etc it's literally just the taxes that I really don't know anything about.


Thanks in advance xx

Gwhiz

You should phone your tax office and ask. They can be very helpful.

easy

You could try these 2 links for a little light reading to start you off.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10013435

http://www.which.co.uk/advice/tax-on-property-and-rental-income/index.jsp


You would probably benefit from consulting an accountant before your first tax return is due, as they'll be able to make sure you claim all the right allowances against tax.

tyllwyd

When did you start renting your house out? Was it since April this year, or before?

Very simply, you are going to have to work out your turnover minus expenses to come to the profit. You will have to pay tax on the profit - at 20% if you are in the basic rate tax band, either by PAYE or by doing a self-assessment tax return. For this tax year (2010-2011) if you do a tax return you need to submit it and pay any tax due by 31 January 2012.

But I agree with easy above, if you have never done it before and you aren't sure, it would be worth getting an accountant to do your accounts because they will know what are allowable expenses etc and can make sure it is all done properly. Keep absolutely all receipts and bank statements etc.

You can get more advice on the Cutting Tax board.

FTBFun

You will be able to claim:

• the mortgage interest (not the full repayment)
• utilities that you pay
• insurance
• the cost of any legal and accounting fees throughout the year, if any
• the cost of any management fees/commission, if you go through an agent (which I assume you will).
• the cost of any repairs to the property
• ground rent + service charges (if applicable)
• advertising costs if you let it yourself (i.e. no agent)

Improvements to the property aren't deductible, but rather are added to the cost for when you would eventually sell the property.

Also before you start renting you will need to register for self assessment using this form:

http://www.hmrc.gov.uk/sa/forms/sa1.pdf

However I recommend you give HMRC a call first off - they're not as bad some people make out.

Good links from easy too.

martindow

Polypops wrote: »

Both mortgages are on repayment and I pay
£320 with a rent of £450
The other one will be
£437 with rent of £395

Are those figures correct? You're making a loss on the second house without considering other expenses. You can only claim interest on mortgages not the repayment portion so you may not be making any profit at all when you add up your figures.

I assume you are conforming with other LL requrements such as gas certificates and protecting deposits?

Polypops

Hi martindow

The figures are correct, I will be paying £437 on a repayment mortgage £240 of which is interest.

I have a family friend who will live in the house long term so he will be paying £395 PCM.

I will also be following all LL safety checks on gas etc.

The reason for buying the property is not to make money right now but use it more as a savings/pension investment.

Just needed to know how inland revenue works and if it was going to cost me an arm and a leg in taxes.

silvercar

So each month you make 395-240=155 less all the other allowable expenses. Say everything else totals £55 a month.

You then have £100 a month taxeable. So it is added on to your income and taxed at your marginal rate. A 40% tax payer would pay £40 tax etc.

Polypops

Thanks silvercar, most useful and I think my heads gets it now