converting to buy to let and landlord tax

coyote101

Hi all

I have been letting out my flat since about this time last year. Am I correct in thinking the first tax return I have to fill in is due in October (paper copy)? Is it a relatively straight forward one to complete in relation to the horrible self assessment one?

The other thing, I was naive of this before but have just discovered I should convert my mortgage to a buy to let. What I want to know is will this cost me a lot of money? What should I tell the mortgage company, I thought to say Ive just started letting it out. The value of the flat is around 90k

Thanks for any advice.

J

latecomer

You should ask your mortgage company permission before you let it out as they may not allow it. If they do they will almost certainly increase the interest rate for your mortgage.

holly_hobby

coyote101 wrote: »

I have been letting out my flat since about this time last year. Am I correct in thinking the first tax return I have to fill in is due in October (paper copy)? Is it a relatively straight forward one to complete in relation to the horrible self assessment one?

If the rental income is less than £2,500 pa - and you are paid by PAYE (either earned or pension) you can apply to HMRC to have them amend your tax code, so that any tax due (net of allowances) is taken by them at source.

If you are not paid by PAYE, or the annual rental income is in excess of £2,500 pa - you pay due tax via your annual self assessment. You shall need to register for this if your don't already use it (which from your comments I suspect you don't).

coyote101 wrote: »

The other thing, I was naive of this before but have just discovered I should convert my mortgage to a buy to let. What I want to know is will this cost me a lot of money? What should I tell the mortgage company, I thought to say Ive just started letting it out. The value of the flat is around 90k.

Well firstly, you should have told you lender when you were considering its rental, to seek their consent to let i.e their permission

You didn't do this, so now is the time to come clean.

Your existing lender may ask you how long you have let it for, or they may not - you know the answer if they do.

They may well give you their consent to let, further to which they may charge an admin fee, and may add a loading to your existing mge rate.

If they refuse their consent or switch to a BTL with themselves (you shall need to change lender (re-mortgage) to a standard BTL mortgage.

Without knowing any figs .. general guidance is:-

• Max BTL LTV will be 85% with Kensington Mortgages (subject to meeting the lenders criteria
• General industry rental income calulcations are 125% of the rental income (use 6% as a ballpark figure).
• Depending upon the LTV you may find a lender who will offer a fee free remortgage. (i.e Halifax is one, with a max LTV of 75%)
• The lower the LTV the more attractive the deal (which stands to reason really !)

If you need to remortgage from your current lender, either because they refuse to give permission, or you want to see if you can achieve a better all round product, from other market providers - I would advise that you have an appointment with a whole of market broker, who will be able to advise you of whom in the market will meet your requirements.

Hope this helps

Holly