Self Assessment Tax on Renting - HELP ME

CornishDave

I hoping someone might be able to give me some guidence. I currently own a 1 bedroom flat which is being paid for by a repayment mortgage. I have just been told im moving to Cyprus for 2-3 years with work and wish to let my property out to pay the mortgage.

My questions are

Can i let the property out under my circumstances with a repayment mortgage? or change the mortagage without incurring the early repayment charge of 2%?
Do i now have to declare this to the Tax Man? If so is there any way i can avoid being charged for tax?

Any help is greatly recieved.

Regards

CornishDave

fbrj

CornishDave wrote:

I hoping someone might be able to give me some guidence. I currently own a 1 bedroom flat which is being paid for by a repayment mortgage. I have just been told im moving to Cyprus for 2-3 years with work and wish to let my property out to pay the mortgage.

My questions are

Can i let the property out under my circumstances with a repayment mortgage? or change the mortagage without incurring the early repayment charge of 2%?
Do i now have to declare this to the Tax Man? If so is there any way i can avoid being charged for tax?

Any help is greatly recieved.

Regards

CornishDave

There should be no need to change your mortgage although you should notify the lender (who may or may not charge you a higher rate)....and your insurance company re buildings and contents.

You can offset most related expenses (this will vary depending on whether it is let funished or unfurnished) against rental income. Typically this will include all mortgage interest, repairs during tenancy, agent's fees including VAT (assuming you use an agent).

If your tax affairs are up to date then you can apply to HMRC to have your rent paid gross as a non-resident landlord....otherwise the agent has to deduct 20% tax at source, after known deductions for expenses have been taken into account.

Broadly, once you have worked out your "net income" - ie rental income less all expenses referred to above - that is added to any other uk income (possibly small if you are working o/seas) and then you can use your personal allowance - which is roughly £5000 - against that income.

Assuming your other uk income is small - my guess would be that you would have little or no tax to pay. Even if you had no expenses at all - your rental income would have to be over £400/month (ie the amount that roughly "uses up" your personal allowance)......but you have a mortgage and as I mentioned all the interest can be deducted.....a mortgage of £100,000 at say 5% would mean your rental would have to be over about £800/month before tax would be payable.

Hope this helps a little...

rosysparkle

fbrj wrote:

If your tax affairs are up to date then you can apply to HMRC to have your rent paid gross as a non-resident landlord....otherwise the agent has to deduct 20% tax at source, after known deductions for expenses have been taken into account.

It's actually 22% But it is not difficult to get a CNR number to get your rent gross, just fill in form NRL1 which you can get from the HMRC website.

If you are overseas you will almost certainly need someone in the UK to manage the property for you.

op

fbrj wrote:

......but you have a mortgage and as I mentioned all the interest can be deducted.....a mortgage of £100,000 at say 5% would mean your rental would have to be over about £800/month before tax would be payable.

Hope this helps a little...

I think it helped me as well, but just to clarify - if I have a mortage of £100K on a house that I'm letting then it is the intrest repayment on the loan that I'm putting against my tax bill? Yesno?

I cannot put the endowment (stop laughing at the back - unfortunately I was warned that it could go up or down) payments against tax, just the interest?

REALLY appreciate any guidance here.

rosysparkle

Just the interest element of the mortgage, and no, you can't put down payments on an endowment.

op

rosysparkle wrote:

Just the interest element of the mortgage, and no, you can't put down payments on an endowment.

Thank you! Job done. Self Asses goes tonight.

I will this year's on April the 5th. Yeah, right

rosysparkle

You've included every other expense which is wholly and exclusively concerned with the letting, then?

op

To the best of my knowledge yes. I'm sure there is a book/piece of software I should be reading about this.

fbrj

rosysparkle wrote:

It's actually 22% But .......


You are absolutely correct of course - apologies for wrong info - slip of the finger/mind/...or something!!!