Universal Credit and property on rent

BigAunty

scootw1 wrote: »

Is that 20k with or without the rent as without would make income 27800

Not necessarily.

The 7.8k potential rent per annum cannot be assumed to be all income.

For example, landlords can legitimately deduct from the profit as valid business expenses things like the interest part of the mortgage, repairs, agency fees, plus 10% wear and tear allowance. Profit - expenses = income.

skintandscared_2

atlantis187 wrote: »

Yes we do intent to live with parents for the foreseeable future.
Even though there it equity in the house it's not the same as having hard cold cash in the bank is it.
This feels totally unfair new system

No, equity in a house isn't cold hard cash in the bank, but if the worst came to the worst you could sell up and have that cash in the bank in a matter of weeks/months.

What the majority of people think is unfair is that you should have that nest-egg subsidised by the benefits pot.

atlantis187

My income is £19500 without the rent payments
We have got an offset mortgage which we pay about £650 and the monthly rent is also £650 so it cancels out any profit we make from this house

princessdon

atlantis187 wrote: »

My income is £19500 without the rent payments
We have got an offset mortgage which we pay about £650 and the monthly rent is also £650 so it cancels out any profit we make from this house

An offset buy to let? Do your mortgage company know you rent it?

BigAunty

atlantis187 wrote: »

We have got an offset mortgage which we pay about £650 and the monthly rent is also £650 so it cancels out any profit we make from this house

I'm not au fait with how offset mortgages work, other than savings passively help to pay them down earlier, but only the interest only part of the mortgage payments are included as a legitimate expense on a tax return for rental income.

If there is a repayment element to your mortgage, this is excluded, so while your mortgage payment and rental income are exact, it doesn't necessarily mean that it's profitless from a HMRC perspective.

I also assume (but am happy to be corrected) that the profit declared on a HMRC tax return is the one accepted by the benefits authority as income for the tax credit purposes.

In fact, its possible for rental income to be considerably higher than the mortgage expenses, and for the landlord to operate the property at a loss, if there have been significant repairs costs or agency fees, for example.

So its not nessarily the case that mortgage expense same as rental income = no profit

Depending on legitimate business expenses, it can be a profit or loss, too, in terms of income.

To the OP - what is your rental income according to your tax return? Landlords must submit a tax return even if they aren't making a profit.

MissMoneypenny

atlantis187 wrote: »

My income is £19500 without the rent payments
We have got an offset mortgage which we pay about £650 and the monthly rent is also £650 so it cancels out any profit we make from this house

But you do fill in your tax form every year for HMRC as required, even if you don't think you make a profit, right?

How did you manage to get Consent to Let from your mortgage company on an offset mortgage?

You do realise that any claim on insurance may be invalid even if you don't have the mortgage companies Consent to Let, even if you have landlords insurance? What if there is a fire in the property? What if your tenant is injured/killed and there is a claim against you?

From the Association of Residential Letting Agents website:-
http://www.arla.co.uk/information/in...ings-insurance

"Consent. It is essential that you advise and obtain consent to let your property from your mortgage lender, Cexisting insurer and head lessee (for leasehold properties). Failure to obtain written consent from these parties may render your insurance void in the event of a claim. Sadly there have been many instances where buildings claims have been totally rejected because the insurer and or mortgage lender was not advised the property was let."

skintandscared_2

atlantis187 wrote: »

My income is £19500 without the rent payments
We have got an offset mortgage which we pay about £650 and the monthly rent is also £650 so it cancels out any profit we make from this house

Yes, but you have profit IN the house, i.e. the £55k equity. As I said before, if you were totally up against it, you COULD sell the house and potentially have £50k in the bank.

atlantis187

I just asked a simple question will letting out a property affect me when universal credits are introduced. And by how much
I don't need the third degree about weather I've done a tax return or if I've got consent to let

Why can't u guys ever just answer the question asked? Simple

BigAunty

skintandscared wrote: »

Yes, but you have profit IN the house, i.e. the £55k equity. As I said before, if you were totally up against it, you COULD sell the house and potentially have £50k in the bank.

Yes, and in historic posts, the OP indicated he was anxious at the potential loss of CTC/UC due to high household savings (due in part to a redundancy payout) and resentment at the switch to more means testing under UC as it discentivised him from his regular practice of saving £500 a month in order to be mortgage free as quickly as possible.

That tax credits allowed some households to build up their investments is a loophole that many people will be glad to see scrapped under UC which is aiming to make households better off in employment than on benefits.

plum2002

skintandscared wrote: »

Yes, but you have profit IN the house, i.e. the £55k equity. As I said before, if you were totally up against it, you COULD sell the house and potentially have £50k in the bank.

As could every homeowner on TC's - looks to me that the renting out of the house is to cover the mortgage not to make money? OP you'd be better off moving back in and renting a room out under the 'rent a room' scheme.