tax on rental income

pedro789

Hi, would appreciate any advice, here goes...

I earn 45,000 (gross) per year and have two rental properties bringing in 900 (gross) per month. Am I liable for 40% tax on both properties?

Thanks

taxsaver

Unfortunately... yes! Do you own them in your sole name or jointly with your wife (if you have one)?

theartfullodger

Only if you make a profit after all expenses (eg mortgage interest..., etc etc etc etc etc etc etc etc...)

pedro789

Thanks Taxsaver, owned solely by me - ouch!

taxsaver

As stated by Artfullodger, it is ofc only on ACTUAL profit after you have deducted all allowable expenses, so assuming you have loans secured on the property or in fact loans taken out to assist in the purchase or development of the properties (such as re-mortgaging your PPR) then you might not have such a big profit on which to pay 40% tax.

theartfullodger

... and don't forget that any losses incurred in previous year's tax returns on property can be carried forward... so even though interest rates have dropped you may still be in an advantageous position...

Still, with all that income you'll no doubt have a well informed accountant.. (errr... no you won't or you wouldnae have asked the question...)

Mind_the_Gap

theartfullodger wrote: »

... and don't forget that any losses incurred in previous year's tax returns on property can be carried forward... so even though interest rates have dropped you may still be in an advantageous position...

Still, with all that income you'll no doubt have a well informed accountant.. (errr... no you won't or you wouldnae have asked the question...)

Hello, artful!

It's me

Tax advice to OP : the idea is to make a loss on paper if not in reality without breaking any law.

pedro789

thanks both, much appreciated

joerugby

If your pension contributions are significant you may not be due to pay any higher rate tax e.g.

Salary £45000
Pension contribution (15%) -£6750
Personal allowance -£7475
Taxable income £30775
Basic rate band£35000
Unused £4225

The unused amount is what you can earn in profit from your rental business without paying higher rate tax