Tax implications in renting property-please HELP

anselld

Sandie11 wrote: »

Sorry to sound a little thick, but with regards to splitting the income 1% to me and 99% to my husband, how does this all work, is it just a case of my husband declaring the 99% income on his tax return or is there an official way of doing this?

You can either own the property in unequal shares or you can split the beneficial income in unequal shares via a trust deed. Then declare it to HMRC via Form 17.

Either way you will most probably still need professional advice to do it properly.

Sandie11

Annisele wrote: »

That's not actually a brilliant yield.

Making the assumptions that you never have void periods and you never incur any costs, you get a yield of about 5.6%. Realistically, it's going to be lower than that.

Leaving aside the fact that you have about £90k of equity in the property...if you had £90k of cash instead, would you be using it to start a business letting out this particular property? If yes, great - but if no, you probably shouldn't let it out at all.

Regarding your question, HMRC does say that income from properties owned by a married couple will usually be treated as belonging 50/50 to each of them. However, it also says here that that won't be the case if:

This has made me think a little, I had inherited the property and really thought this was a good investment as the mortgage is £239pm and I am getting in £850pm. Otherwise I would sell the property, get half and then I am not sure what i would do with the money.

Is this perhaps not the best thing to do?

Sandie11

anselld wrote: »

You can either own the property in unequal shares or you can split the beneficial income in unequal shares via a trust deed. Then declare it to HMRC via Form 17.

Either way you will most probably still need professional advice to do it properly.

Now that I have learnt so much more, I think I will. Its so helpful having these sites.
Would I goto a normal solicitor/financial advisor?

anselld

Sandie11 wrote: »

Now that I have learnt so much more, I think I will. Its so helpful having these sites.
Would I goto a normal solicitor/financial advisor?

Solicitor for the trust deed.
Form 17 easy enough to do yourself.
Up to you if you want an accountant to help with the tax returns.

Financial advisor will just try to sell you stuff. Not needed to do what you have mentioned above.

joerugby

It might be worth comparing the net returns on the various types of investment open to you, for example:

1) If you keep the property and rent it out you could budget for a return of £850 x 11 months =£9350 minus mortgage interest (3%?) £2760 minus maintenance and other costs (say £250/mth) £3000 = £3590 = 4% gross, 3.2% net. There are risks to your income (e.g. tenant fails to pay rent) and to your costs (tenant trashes house). There is a possibility of a capital gain and the risk of a capital loss. If the house fell in value by £20000 your capital loss would be £20000 / £90000 = 22%

2) Sell the house and invest your net proceeds in a 2 yr fixed rate bond (e.g. Santander) paying 4% gross or 3.2% net. No possibility of capital gain or loss, your capital is secure.

3) Sell the house and invest your net proceeds in a mix of equity income funds e.g. Invesco Perpetual Income which has a historic net yield (after basic rate tax) of 3.86%, dividends paid twice per year. Income should (hopefully) rise over time and capital should grow too in the long term but there would always be some risk to both capital and income

The choice really depends on your objectives and attitude to risk.

If it were me (and I stress my circumstances might be very different to yours) I would go for a mix of 2 and 3