Property downstairs up for sale - What are the ins and outs of tax/renting

muggz

Hi all,

The 2 bed flat downstairs is up for sale and I'm considering buying it. I've been trying to research the implications of buying it but because it's a bit complicated I thought I would ask here first.

If I purchased it with the aim of making my flat and the flat below into a house (without any building work done as all I would need to do is remove a door in the hall) do I need permission to do this as I am decreasing the amount of properties in the area?

Also if I make it into one property then rent the rooms out to friends, do I have to pay tax on the property when I come to sell it even though it's my only property?

If this is the case would it be better to get it as a buy to let mortgage and keep it seperate?

And if it was my only property that means I wouldn't need a buy to let mortgage, just a larger amount on my own one?

Thanks for any help!

Cheers

poppysarah

Two energy meters need to be one?
one water supply?


Rent a room scheme will tell you more about renting rooms out.

muggz

The rent a room scheme only covers one room, if you rent more isn't there some additional issues when you come to sell the property?

PasturesNew

If it's 3 or more unrelated people that'd be an HMO.

But the bigger issues are before that. You'd need the freeholder's permission and full building regs to do it.

The value of the whole will be less than the two flats.

If you tried to separate it back into two flats it'd need planning permission (not needed to combine the two, I don't believe).

Forget it. Buy it if you must, as a separate unit. But to knock it into one would be pure madness and possibly unachievable.

m1ntie

muggz wrote: »

The rent a room scheme only covers one room, if you rent more isn't there some additional issues when you come to sell the property?

This is wrong

You can let out as many rooms as you want under the rent a room scheme.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017804

muggz

PasturesNew wrote: »

If it's 3 or more unrelated people that'd be an HMO.

But the bigger issues are before that. You'd need the freeholder's permission and full building regs to do it.

The value of the whole will be less than the two flats.

If you tried to separate it back into two flats it'd need planning permission (not needed to combine the two, I don't believe).

Forget it. Buy it if you must, as a separate unit. But to knock it into one would be pure madness and possibly unachievable.

Yeah that's all cool I'm the freeholder.

I don't need to knock anything through, only need to take a door off the hinges that's it.

So the idea was to just have it as one property, then when I come to sell it in the future sell it as two, however then I pay capital gains tax so perhaps the question is that is it gonna work out better to sell it as a whole but cheaper or two with capital gains.

muggz

m1ntie wrote: »

This is wrong

You can let out as many rooms as you want under the rent a room scheme.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017804

Sorry I meant one room tax free, I was told if you rent out multiple rooms then I could pay capital gains on selling the property or something like that?

G_M

You pay capital gains tax on a property you own but isn't your main residence.

Since the land registry, post office, council tax, water company, electic/gas companies etc will all consider these as 2 separate properties, then one of them will not be 'your primary residence'. Unless, of course, you go through the process of turning them into one property: with all those organisations.

Income tax is payable on rental income, though the rent a room scheme gives tax free allowances - see the link above. But again, that applies to rooms in your home and since officially the building consists of 2 flats, one of them is not your home.....