Landlord Taxes Help

BigDave81

Hi Everyone

I've always wanted to buy a place to rent out and was in the position to put the dream in motion a few months ago.

I purchased a 1 bed flat on BTL mortgage and have nearly finished doing it up ready to start renting, its unfurnished.

I appear to have been under the misconception that rental income wouldn't be taxed under £10100.00 a year due to CGT but this is only for sale of assets.

Is it correct that I have to fill out a tax return every year for the rental income and also that although the majority goes straight to the mortgage company this is not a deductible and I need to pay 20% tax on the whole amount?

Apologies for the possible stupidity of my post but this is all new to me and the directgov tax pages don't help much and have searched about and got more and more confused.

From what I have found I know I can deduct ground rent, insurance policies, service charges etc.

Thanks in advance.

Typhoon2000

You will need to fill a tax return.
You can claim relief on the interest component of your mortgage, any fees assoicated with letting (advertising, letting agent fees, repairs to building, ground rent, gas certificates, management charges etc) and you can claim 10% of income as wear and tear. You pay tax on the remainder of your letting income (if any) at your usual tax rate.

clairet707

Typhoon2000 wrote: »

You will need to fill a tax return.
You can claim relief on the interest component of your mortgage, any fees assoicated with letting (advertising, letting agent fees, repairs to building, ground rent, gas certificates, management charges etc) and you can claim 10% of income as wear and tear. You pay tax on the remainder of your letting income (if any) at your usual tax rate.

Not if its unfurnished you cant!

But other than that you are correct..

discplayer

Typhoon2000 wrote: »

You will need to fill a tax return.
You can claim relief on the interest component of your mortgage, any fees assoicated with letting (advertising, letting agent fees, repairs to building, ground rent, gas certificates, management charges etc) and you can claim 10% of income as wear and tear. You pay tax on the remainder of your letting income (if any) at your usual tax rate.

Yes, except the 10% allowance is only for furnished lettings.

The HMRC website has a guide and there are books and associations that help.

DawnW

you have to register for self-assessment. Give them a call once you start renting your property out. It is quite straightforward if you are organised and keep all receipts etc. Remember you can have the cost of landlord insurance, gas certificates etc as well as the other things mentioned.

G_M

Property is taxed in different ways at different times. eg capital gains, income, SDLT etc etc. See the HMRC website here.

Since you also appear to have only a basic understanding of what's involved in renting out a property, read this post here and ALL the links.

theartfullodger

There are at least 7 taxes a landlord may have to pay. Pay them all, promptly, and keep records - for income tax at least 7 years, for CGT forever until you sell (arguably longer..).

Suggest you buy & read carl Bayley's "How to avoid property tax"

http://www.amazon.co.uk/How-Avoid-Property-Carl-Bayley/dp/1907302263

BigDave81

Hi Everyone
Thanks for all your replies, most appreciated.
I currently have an interest only BTL mortgage so can deduct that amount, the emergency insurance, buildings insurance and service charge so will then just do a return for whatever is left over as I thought so thanks for confirming.

Only other thing is I was planning on adding the rental mortgage to my house mortgage to avoid very high arrangement fees and interest rates on BTL deals, would this be a bad idea then as I couldn't provide correct documentation to deduct the interest from that period?

Thanks again for all your help, still learning as I go!

real1314

BigDave81 wrote: »

Hi Everyone
Thanks for all your replies, most appreciated.
I currently have an interest only BTL mortgage so can deduct that amount, the emergency insurance, buildings insurance and service charge so will then just do a return for whatever is left over as I thought so thanks for confirming.

Only other thing is I was planning on adding the rental mortgage to my house mortgage to avoid very high arrangement fees and interest rates on BTL deals, would this be a bad idea then as I couldn't provide correct documentation to deduct the interest from that period?

Thanks again for all your help, still learning as I go!

It's perfectly acceptable to use your home as the security for the loan rather than the rental property. I *think* hmrc will allow for interest on an amount up to the purchase price, but it's best to check the exact rules.
It's similar to someone raising capital for a business by putting their home up as security.

B_Blank

Why does everyone BTL to push up house prices for poor FTB

G_M

BigDave81 wrote: »

Only other thing is I was planning on adding the rental mortgage to my house mortgage to avoid very high arrangement fees and interest rates on BTL deals, would this be a bad idea then as I couldn't provide correct documentation to deduct the interest from that period?

Thanks again for all your help, still learning as I go!

This is allowable, provided the additional loan is used for the BTL.

Obviously where the loan is on the BTL property HMRC can easily see the link. If it is on your existing domestic mortgage the link is less obvious to HMRC.

However is you take out an additional loan on the date you buy the BTL, then it is not hard to establish for HMRC that the 2 are linked.