Renting out only property - tax implications?

Jet

I posted this on the "cutting tax" board but someone suggested I post it here as well.........

I know of someone who owns a property and rents it out.

He lives on a boat the rest of the time or stays with his girlfriend. His post is re-directed from the rented property to his girlfriends address.

He has a large mortgage on the property and the rent only covers the mortgage and he makes very little "profit". The mortgage is interest only.

Should there be any tax implications and should he have a "buy to let" mortgage (I know he has a "normal" mortgage)?

silvercar

he should be declaring the letting of the house, whether or not he makes a profit. if the rent only just covers the mortgage there is likely to be no income tax to pay.

when he comes to sell he may have a CGT liability, depending on the calculations.

if he is not living in the place he should definitely have the correct building insurance.

as this is his only property he may get away witha residential mortgage, though correctly he should be getting consent to lease from the lender.

the insurance, tax and mortgage situations are all independent of each other. ideally all need tobe corrected but there is little harm in correcting one or two without the other if this is unpalatable. correct insurance is essential IMHO.

Paul_Herring

he should be declaring the letting of the house, whether or not he makes a profit. if the rent only just covers the mortgage there is likely to be no income tax to pay.

I was under the impression that only the interest element of the mortgage payment could be deducted from the rent.

silvercar

Paul_Herring wrote:

I was under the impression that only the interest element of the mortgage payment could be deducted from the rent.

correct and OP said the mortgage was interest only.