Advice - 1st time landlord

NunarNikki

Hi Everyone

My husband and I are thinking about renting out a flat we cannot sell in the current climate.

We are unclear about whether we declare the income to the tax man or not?? We have had lots of conflicting advice....

We've worked out that we would be making a profit of about £50 pcm (not much at all). Do we pay tax on profit or the rental income?

Also, any general advice about insurances etc we might need would be appreciated.

Thanks all!

Confused....

rentergirl

Do you have permission to let from your mortgage company? And please be aware that you will need landlord insurance, as letting is a business and there is no guarantee that of continuous occupation (tenants go awol of die...) Are willing to be called out when the pipes have burst? It's not easy.

sirmosh

You'll probably find you'll actually be making more than £50 in the eyes of the taxman, you can't count your entire mortgage as a cost, only the interest repayments. You'll need to notify your lender (who will probably charge you extra because you're letting the property).

Obviously not declaring the income is illegal and could see you get fines and prison sentences.

Lovelyjoolz

Firstly, don't take being a landlord lightly. you are effectively starting a business and you must treat it as such and take it seriously.

Yes, you must declare your income for tax purposes. You must register as Self Employed with HMRC and complete a tax return in October (for paper returns) or January (for online returns). Income tax is payable on profit made after allowable expenses. The rate of tax is dependant on what rate of tax you currently pay on PAYE or other income. E.g. if you're a 40% taxpayer in employment, you'll pay 40% tax on rental profits.

Allowable expenses include the interest on mortgage payments, but not the capital payments, so you might want to switch to an interest only mortgage.

You must also get your mortgage lenders permission to let the property. They may require you to switch to a Buy To Let mortgage and will want a fee from you for doing this.

You will require some Landlord insurance and should probably consider joining a Landlord's association.

Read this post for more info before you make the decision to be a LL:
https://forums.moneysavingexpert.com/discussion/comment/41160642#Comment_41160642

And look at the photos in this post and think abount whether you could cope with your flat being destroyed by tennats - it's more common than you might think:
https://forums.moneysavingexpert.com/discussion/3645137=

NunarNikki

Thanks for your replies. They're helpful and certainly give us food for thought.

We're seeing a letting agent tonight and will at least have some more questions for them now.

There are so many people out there that are letting their property on the quiet! We certainly didnt want to go breaking the law - sirmosh!

Thanks everyone

ognum

NunarNikki wrote: »

Thanks for your replies. They're helpful and certainly give us food for thought.

We're seeing a letting agent tonight and will at least have some more questions for them now.

There are so many people out there that are letting their property on the quiet! We certainly didnt want to go breaking the law - sirmosh!

Thanks everyone

Just be aware that the letting agent will not care if you get into trouble for none payment of tax, it is out of his spere of responsibility, he is in buisness and the more people he can persuade to let property the more money he makes!

You do need to self assess for tax purposes whether you make a gain or a loss. Don't let anyone tell you you do not.

You need adequate landlord insurance and need to factor in repairs and tenancy voids. It is not just about taking money in there is a lot of responsibility and a need to maintain safety for your tenants with yearly gas safety certificates as well as maintain acne of the electricity systems etc.

If I had a large mortgage on a property and profit because of expenses was high I would sell and avoid the hassle.

Fuzzyness

just doing some very basic maths, asusming you make 50 quid a month profit, that equates to 600 for the year. 20% basic rate on that would equate to 120 quid. just pay it and have peace of mind safe in the knowledge that you've made 480 quid profit and you dont have to worry about that knock on the door.