Question about Tax on Leasing Income

StuMcBill

Hi,

My fiancee and I are considering leasing out our property, however we have some confusion over the tax implications.

If we rent our property out for £900pcm and our mortgage is £731pcm, would we pay tax on the full £900 or would it be the difference between rent and mortgage (£169).

We have also read (on the direct.gov website), that you can offset the "Interest on Property Loans" on your tax payments. We are not 100% sure what this means? Does it mean that, if you pay 22% income tax, and your rate on your mortgage is 5%, you would only pay 17% on your rental income?

Thank you for any help you can provide.

Stewart & Gemma

clutton_2

you pay tax on your profit.. read the revenue website for property expenses which you can claim.. you can only claim the interest element of the funds borrowed for the BTL - whether it was a direct mortage for the property or money borrowed against your home...

you cleary need to join National landlrods association... joining fee is tax deductible as an expenses and they have a great legal helpline and masses of information you will need to know before you embark on this

mynameisdave

You will pay tax on 900 - 731 - capital repayment of 731.

You don't get any offsetting for the repayment part of the mortgage - only the actual interest.

There are other allowable expenses that you can claim and they all get added up and any profit you make from rent after the deductions will be paid at the current 20% tax levels (I assume 40% if you are a high earner)

StuMcBill

mynameisdave wrote: »

You will pay tax on 900 - 731 - capital repayment of 731.

You don't get any offsetting for the repayment part of the mortgage - only the actual interest.

There are other allowable expenses that you can claim and they all get added up and any profit you make from rent after the deductions will be paid at the current 20% tax levels (I assume 40% if you ae a high earner)

Thanks for the replies, but you have confused me slightly.

I called my mortgage lender and they confirmed that +/- £550 of my £731 monthly payment is interest, so I would be taxed on £900 - £550 = £350?

So this means I would be taxed 20% (or more) on £350 per month (£70 per month). I know this will change every month as the interest paid on each payment will be slightly different?

Is this correct?

Thanks again.

Stewart & Gemma

clutton_2

nearly

1) you add up all your rent p.a..
2)you add up all your mortgage interest-only payments p.a.
3)you add up all your expenses - repairs, gas safety cert, EPC, marketing, admin, travel etc etc etc (go to the revenue website and see what expenses you can claim)



then deduct 2+3 from 1 - IF you make a profit you pay tax on it - if you dont, you carry forward the loss to next year....

StuMcBill

Thanks, that is clearer now!

I might have to join the Landlords association, like you suggested, so I can get advice on what I can claim as expenses.

Thanks again for the help!

Stewart & Gemma