self assessment help please

sereneone

Hi
My wife and i rent a house out which it is mortgage free, the rent is £450 per month.

For the last few years, i have been doing some photography work and property maintenance. When i calculate my self assessment details, i only take my tax allowance into consideration, would it be better if i include my wifes allowance? she works full time and earns approx £15000 per year.

I would appreciate any advice
Many thanks

CLAPTON

what do you mean to take your tax allowance into account when doing your self assessment?

sereneone

Hi
I was referring to my personal tax allowance of £8,105
thanks

agrinnall

If you and your wife jointly own the property then I think you should both be declaring a share of the rental profit on your tax returns. If you are both standard rate taxpayers at the moment then it won't make any difference to the tax paid overall, unless it tips your income into the higher rate band.

Where you might make some extra money is if you took out a BTL mortgage on the property so that you could offset the interest paid against the income, pitch it at the right level, taking other expenses into account, and your taxable rental income could be zero.

heretolearn_2

i'm not entirely clear what you are asking here, but

you can't include anything for your wife on your tax return.
If you both own the property, you should both be declaring the income on your own tax returns.
There is no mortgage interest to claim as expenses off the rental income, but are you claiming for everything else you should be?

(don't see the point of btl mortgaging it, fine, you'll cut your tax a bit but then you have to pay the mortgage...no overall gain.)

CLAPTON

I'm still a little unclear

when you fill in your self assessment form you

1. declare all your income i.e. rent plus photo work and property maintenance

and
2. to declare all your allowance expenses (R&M of the rental property, gas safety checks etc, cost of photo materials etc etc)

3. the difference between the two gives your profit

4. you do not mention your tax allowance as HMRC include that for you when calculating the tax owed from your profit

5. if the property is jointly owned then you only declares half the rent and your wife declares the other half

6. otherwise your wife's tax position and yours are completely separate.

agrinnall

heretolearn wrote: »

(don't see the point of btl mortgaging it, fine, you'll cut your tax a bit but then you have to pay the mortgage...no overall gain.)

The gain is the potential for leveraging. The OP has the money from the mortgage to do something else with - such as buy another rental property, which is how landlords end up with a portfolio of properties. Or just stick it in what passes for a high interest account these days and make a bit extra.

CLAPTON

agrinnall wrote: »

The gain is the potential for leveraging. The OP has the money from the mortgage to do something else with - such as buy another rental property, which is how landlords end up with a portfolio of properties. Or just stick it in what passes for a high interest account these days and make a bit extra.

leverage to buy another property maybe

but is it likely that you can find a savings a/c with a better interest rate than the BTL mortgage (all net of tax etc.)

sereneone

Thank you so much for all your kind advice!:)

agrinnall

CLAPTON wrote: »

but is it likely that you can find a savings a/c with a better interest rate than the BTL mortgage (all net of tax etc.)

Well, yes, as long as the interest on the mortgage can be fully offset against the rental income, in which case the mortgage costs nothing so the savings interest is all profit. Although I'd agree that with savings interest in the doldrums it may not be worth the effort (and the fees for taking out the mortgage) at this time.

CLAPTON

agrinnall wrote: »

Well, yes, as long as the interest on the mortgage can be fully offset against the rental income, in which case the mortgage costs nothing so the savings interest is all profit. Although I'd agree that with savings interest in the doldrums it may not be worth the effort (and the fees for taking out the mortgage) at this time.

that requires the interest rate on the saving after tax must be greater that the interest being charged on the mortgage

so if you owe 100,000 on a BTL mortgage at 5% then you pay at a rate of 5000 per annum less of course offset against rent (assumed to be more tha 5000pa) so net is 4000 per annum

so unless the saving interest is at least 4% after tax there is a net cost