Buy to Let mortgage tax relief

sidthekid

Can anyone please tell me how to work mortgage tax relief on a buy to let mortgage?
I'm trying to work out if it is financially worth me renting out my flat, I know you can claim back tax on everything from maintenance charges to buildings insurance but I'm not sure on what percentage it is.

On a £500 month interest only buy to let mortgage at say 5% APR and I'm a basic rate tax payer. Could somebody please tell me how much tax I could get back each month?

Many Thanks

kingstreet

You don't get "tax back," what happens is, when you account for your rental income at the end of the tax year, you deduct allowable expenses from it, leaving a lower amount on which tax is payable.

You can have expenses which exceed the income, then you make a loss. But you can only offset losses on property rental against profits on property rental, so you can't claim a rental loss against your other earned income.

For example;-

Rental income - £500 per month (£6,000 pa)
less
Mortgage interest - £300 per month (£3,600pa)
Letting fees - £40 per month (£480pa)
Insurance - £30 per month (£360pa)
Repairs - £20 per month (£240)

So, income is £6,000 less £4,680 allowable expenses.

Your taxable income from property letting is therefore £1,320.

You add this to your other income and it is taxed at your marginal rate. If you are a basic rate taxpayer, you'll pay 20% of that £1,320, or £264. If a higher rate taxpayer, you'll pay 40%, £528.

You will do this by making a return to HMRC each year.

tim123456789

you don't get any tax back each month

you just don't have to pay tax on the rent received (and no that isn't a semantic difference)

Curtis_E

The get to Let Landlords have a bonus over hard put first-time patrons as a result of they take pleasure in tax breaks that don't seem to be accessible to owner occupiers.

The Inland Revenue, permits landlords to offset the prices of mortgage interest, holding agency fees, and replacement furnishings and repairs, against the tax collectable on income.

Regular patrons, however, waved au revoir to tax relief on mortgage payments back in 2000 once the govt abolished Miras.

Buy-to-let investors ar locusts WHO flip pleasant residential neighbourhoods into desolate wastelands occupied by transient tenants, stopping the expansion of stable communities.

Surely if the governement stopped or restricted the amount of properties that the get to Lets bought that might stabalise the property marke

Werdnal

As above, you don't actually get anything back. You tot up your rental income for the financial year, you deduct the allowable expenses (note only interest on the mortgage is deductable, not the repayments), and the remaining "profit" will be what HMRC tax you on. You may not make enough to pay any tax, but you have to declare it as it is taken into account with any other income you receive aswell.

It may also affect any benefits you or a partner would be entitled to.

Mallotum_X

Curtis_E wrote: »

The get to Let Landlords have a bonus over hard put first-time patrons as a result of they take pleasure in tax breaks that don't seem to be accessible to owner occupiers.

The Inland Revenue, permits landlords to offset the prices of mortgage interest, holding agency fees, and replacement furnishings and repairs, against the tax collectable on income.

Regular patrons, however, waved au revoir to tax relief on mortgage payments back in 2000 once the govt abolished Miras.

Buy-to-let investors ar locusts WHO flip pleasant residential neighbourhoods into desolate wastelands occupied by transient tenants, stopping the expansion of stable communities.

Surely if the governement stopped or restricted the amount of properties that the get to Lets bought that might stabalise the property marke

Has the nurse forgotten to give you the tablets today?

sidthekid

Thank you for all your answers.
So basically I just pay tax on any profit I make, easy.

Oh dear Curtis has mummy and daddy thrown you out!!

kingstreet

Curtis is in Canada.

Ignore.

Werdnal

sidthekid wrote: »

Thank you for all your answers.
So basically I just pay tax on any profit I make, easy.

Oh dear Curtis has mummy and daddy thrown you out!!

But you have to declare it all on an annual self-assessment tax return and keep valid and accurate records and receipts - HMRC reserve the right to check! You can do it online, but keep paper copies of everything just in case.

sidthekid

I think if I do go for it I will definitely get an account for the first couple of years, just to make sure.