Tax rate while renting home while abroad

snowyeagle

Hi gang -

My partner and I are in the process of buying a house, which we hope to complete by Feb/Mar 2011. We plan to live in the house and then live abroad for a year while renting out this house. If we were to be away from April 2012 to April 2013, would we only pay tax on the rental income that comes above our free tax band rate or would it be 25% on the rental income for that year or some other amount/rate?

We are newbies to the mortgage/buying/renting market so would appreciate any and all help/advice on this issue!

Many thanks in advance!

wodgerdodger

Tax will be liable on the total rent however you an offset management costs, mortgage interest and other items from gross rental income.
You would also be advised to apply to HMRC for Non Resident Landlord status in Newcastle which will allow the tenant to pay to you the gross rent, if you do not get permission then the tenant should withold tax on the rent and pay it to HMRC themselves...not a good idea.

snowyeagle

Many many thanks for your advice and help, think we are in a better position than we thought!

G_M

And yes, you can also use your personal allowances for each tax year against total income (assuming for example you have other income besides the rent).

Full details here.

I'd urge you to read up on renting: legal issues/financial management/ using agents/ defaulting tenants etc etc. There are many books like this one.

tbs624

snowyeagle wrote: »

Hi gang -

My partner and I are in the process of buying a house, which we hope to complete by Feb/Mar 2011. We plan to live in the house and then live abroad for a year while renting out this house.

Presumably you are buying the property on a residential mortgage so you will need to seek Consent to Let from your mortgage provider, which may cost you an "admin fee" and or an increase in interest. They may be reluctant to grant consent if you have litttle equity in the property and they may insist on a max 6 month AST initially ( basically to try to limit how long it would take them to boot your T out if as lenders they needed to repossess the property)

You will need to provide an address in either Eng/Wales at which notices relating to the tenancy may be served - without this you may not "lawfully request" rent from the T.

Lots to look into - have a look at landlordlaw, landlordzone and the national LL associations - NLA/RLA.

fozzeh

wodgerdodger wrote: »

Tax will be liable on the total rent however you an offset management costs, mortgage interest and other items from gross rental income.

OOI, If all rent is not for profit and it will be going to pay a loan set against anothe property, is there tax to pay on that?

Ta.

tbs624

wodgerdodger wrote: »

Tax will be liable on the total rent however you an offset management costs, mortgage interest and other items from gross rental income.
You would also be advised to apply to HMRC for Non Resident Landlord status in Newcastle which will allow the tenant to pay to you the gross rent, if you do not get permission then the tenant should withold tax on the rent and pay it to HMRC themselves...not a good idea.

AFAIAA the scheme is dealt with by the Liverpool office. Only applies if rent is more than 100 quid per week. Not sure what your issue is about the T being responsible - if the T is instructed by HMRC to deduct the tax and pay it over to the Shipley a/cs office every quarter and they don't do so then it's they who will be pursued to make up the shortfall. LL must discuss in advance with tax office so that T knows what has to be done and the T is required to send LL the official receipts for the tax.

G_M

fozzeh wrote: »

OOI, If all rent is not for profit and it will be going to pay a loan set against anothe property, is there tax to pay on that?

Ta.

See the answer and link above.

fozzeh

G_M wrote: »

See the answer and link above.

Had a look at the basics.

PTA was a point of interest when it comes to the end of this tax year but would need to look if it can be used against a nominated landlord/lady or if it is against who is down on the letting agreement/mortgage statement there.

Will have a deeper read about how it can be determind that none of the money will be taken as profit (needs to pay a loan off against the new property which has been done...).