Do I need an accountant now?

chrisyd

Hi,

My father passed away last year and so I have inherited his house. I am going through the process of changing the deeds into my name.

Anyway, we are looking at renting the property but needs lots of work (I will be hopefully speaking to some builders next month to get quotes for a renovation - I estimate I will not get change from £30k). I am now paying council tax on the property (£100 per month) and will be traveling to the property every couple of months or so to make sure things are OK etc (700 mile round trip).

At the moment everything is paid out of my own pocket, but can I claim anything back at the moment even though the property is not rented out?

Another question. I am paying a mortgage on my current property (£750 per month). My fathers place was owned outright. With the money I need to borrow for the renovation (£30k) can I get a mortgage for the existing money I own on my current property (£70k) and put it all onto my father's house (£100k). I understand I can then claim back the interest I would pay on the loan against any income from the rental of the property.

As you can guess I am new to this area and so my main question is should I get an accountant now to see what tax I could reclaim? I am also a higher rate tax payer if that makes any difference.

thanks

Richie(UK)

Hi Chrisy,

You will need to declare your rental income to HMRC. Should they ever decide to query any of the figures contained within your tax return which of these options would you prefer?

1. Advise them that the figures are based upon comments received in an internet forum (regardless of how well thought of and popular that site may be!)
or
2. Refer the matter to your accountant for them to answer on your behalf.

Most accountants will offer a free initial meeting so that you can get a feel for whether you would like them to act on your behalf or not.

Davide123

Yes I think you should see an accountant
generally any capital expenditure, ie that enhances the value of the property, is not set against rental income.
Only revenue expenditure, ie repairs.
Capital expenditure is deducted when you come to sell the property.

holly_hobby

Not if the property is not fully available and being advertised for let during the period the costs (bldg works and travel) are being incurred.

Once it is let, your travelling costs (if soley in connection with managing the business) may be offset, as are associated lettings management and legal/accountancy professional fees, maintenace and essential repair, landlords ins, provision of services and utilities inc reqd landlord safety certs (list not exhaustive). As always, ensure you have a full audit trail of all such claimed costs, receipts etc.

Moving on, yes you may withdraw equity from the let property under a BTL remortgage (classed as capital release for HMRC purposes) - as a first time landlord with an unencumbered (mge free), your max LTV will initially be 75%. The lender may require a min income of 25k may be reqd, and will require supporting rental income of 125% of mge interest (use 6% for a ballpark calc) plus letting under AST. Additionally, as you are a first time landlord, management by an ARLA letting agt, may also be a requirement (but which you may choose to do anyhow given your distance to the property and being able to actively manage/ be available for tenants).

Resulting mge interest is a permitted deduction from rental income for a mge equal to the value of the property when it entered commercial let. This would need to be considered for future ref if, and subject to rising market and max LTVs, you wanted to release further equity resulting in an increas to mge borrowings which would exceed the value of the property when it originally entered commercial let. You may of course exercise this option, but be mindful that any borrowings in excess of the original value, would not be a permitted deduction from rental income for tax purposes.

Your return of net rental income for tax, will be via annual self assessment, or via full accounts if reqd.

This is all to get you started and give you a general idea - until you find your feet, you may well benefit from an accountant (fees to do with the business are a permitted deduction don't forget).

Regarding remortgaging the let property, I would recommend seeking a broker, given that there are a number of BTL lenders whom are intemediary access only, and in doing so you will ensure you have access to the full market range and products available to you.

I'll conclude in not giving the lecture on how difficult a landlords role may be ..... just make sure you are familar with landlord responsibilites and your target audience, to give you the best chance of success and not going grey in the process !!

Could I make a final suggestion in thinking about future CGT liability on sale. If you live in this (if sensible given your current personal situ) before you start renting this out, then you will be able to claim significantly more reliefs and allowances on any gain on disposal, than if you don't live in it before its sale ..... your accountant will explain in more detail.

Lengthy and farily deailed post .. apologies ... but hope it gives the bones and helps get the ball rolling.

Best of luck and hope this helped !

Holly x