tax on rental income

r3becca

Hi I am unsure if this is posted in the correct place... buutttt looking for some info on tax on the income of our property we have just started renting out.

Would anyone be able to advise on how much tax we will will have to pay; we receive £700 a month rent & the mortgage is £787 (£661 of that is interest). Do we pay tax on the difference between £661 and £700 or on the full £700. My partners income is 42k per year.

Any info would be great as we are new to this!

Thank You

BitterAndTwisted

You have to declare all of the rental income but you can offset the mortgage interest agaist that and any other legitimate expense on your tax-return.

00ec25

basics explained here on direct gov
there is a list of allowable deductions which will give the net profit figure you are then taxed on, as stated only the interest is a,llowed not any capital repayment from the mortgage.

it is fairly certain that you will be making no profit by the time you take off buildings insurance and athe other costs you incur to be legal landlords (gas inspection being the main one). If you make an overall loss for tax purposes you cannot offset this against other income, all yopu can do with a property related loss is carry it forward indefinately until you make a profit

the technical details are on HMRC webiste here

even if you make a loss you must still inform HMRC that you are receiving rental income - they will then decide if you need to submit a full tax return or not each year

sharpee

If you are a new LL then I would recommend getting an accoutant to do your first tax return. Should cost around £100 which can be offset in your tax return.

Have a read through this is all quite straight forward

http://www.hmrc.gov.uk/manuals/pimmanual/index.htm