Rental property tax

nick100*2007

I bought a buy-to-let property in Aug last year, the house was in need of a full refub so has not been let in this time. I understand that interest payments on my mortgage can be taken off my income, I obviously haven't had any rental income yet so am effectively at a loss. My mortgage interest per month is £270.58 which means I have so far paid £2435 in interest payments so according to the tax man I earned -£2435.

My question is, will this loss be carried over into the new tax year? Will I only be eligible for tax once the loss has been wiped out by profit when the house is let? I stand to earn £275 per month after the mortgage is paid and other costs so it will take a while to wipe out the loss.

I hope this makes sense...... And one more thing, when I am eligible to pay tax on the rental income, how do I pay the amount due? One lump sum? Or is it broken down into monthly payments over the next tax year?

Thank you,

Nick

anselld

nick100*2007 wrote: »

I bought a buy-to-let property in Aug last year, the house was in need of a full refub so has not been let in this time. I understand that interest payments on my mortgage can be taken off my income, I obviously haven't had any rental income yet so am effectively at a loss. My mortgage interest per month is £270.58 which means I have so far paid £2435 in interest payments so according to the tax man I earned -£2435.

My question is, will this loss be carried over into the new tax year? Will I only be eligible for tax once the loss has been wiped out by profit when the house is let? I stand to earn £275 per month after the mortgage is paid and other costs so it will take a while to wipe out the loss.

I hope this makes sense...... And one more thing, when I am eligible to pay tax on the rental income, how do I pay the amount due? One lump sum? Or is it broken down into monthly payments over the next tax year?

Thank you,

Nick

Assuming this is your first property the "rental business" does not start until first let. At that point (but not before) certain expenses can be deducted including interest ( provided you can prove the property was bought and used soley forthr purpose of rental).

In practice you deduct the expense at the end of the tax year in which it falls (ie the year in which first let) via tax return. If you make a loss that year the loss can be carried forward but can only be used against property income.

It follows that if you change your mind and never let the property you can never claim the expense.

It also follows that you do not declare anything on the tax return for the year just ended because at this point you do not have any property income nor any allowable expense.

00ec25

anselld wrote: »

It follows that if you change your mind and never let the property you can never claim the expense..

agreed

anselld wrote: »

It also follows that you do not declare anything on the tax return for the year just ended because at this point you do not have any property income nor any allowable expense.

are you sure? question seems to have much overlap with this question still on the front page at the time of posting. One of the accountants (Nicola Ed) has answered and this is vouched by ex-HMRC (ie Jimmo) so can be taken as definitive.
https://forums.moneysavingexpert.com/discussion/4536147

Wywth

nick100*2007 wrote: »

I bought a buy-to-let property in Aug last year, the house was in need of a full refub so has not been let in this time. I understand that interest payments on my mortgage can be taken off my income, I obviously haven't had any rental income yet so am effectively at a loss. My mortgage interest per month is £270.58 which means I have so far paid £2435 in interest payments so according to the tax man I earned -£2435.

My question is, will this loss be carried over into the new tax year? Will I only be eligible for tax once the loss has been wiped out by profit when the house is let? I stand to earn £275 per month after the mortgage is paid and other costs so it will take a while to wipe out the loss.

I hope this makes sense...... And one more thing, when I am eligible to pay tax on the rental income, how do I pay the amount due? One lump sum? Or is it broken down into monthly payments over the next tax year?

Thank you,

Nick

Yes, as it was bought as a BTL, then any losses in the last tax year can be declared on your tax return (ensure you fill in the property pages) and can be carried forward to offset against hopefully future gains.
(If you subsequently decide not to let it, then you make no gains so you will have nothing to offset losses against)

Payment of any tax when due is as per the usual rules

anselld

00ec25 wrote: »

are you sure? question seems to have much overlap with this question still on the front page at the time of posting. One of the accountants (Nicola Ed) has answered and this is vouched by ex-HMRC (ie Jimmo) so can be taken as definitive.
https://forums.moneysavingexpert.com/discussion/4536147

I will happily be corrected as I am not an accountant, but ...
http://www.hmrc.gov.uk/manuals/pimmanual/pim2505.htm
"Where the rental business is letting property, the business can’t begin until the first property is let."

So how can you declare a loss on a business which has not yet started?

ps .. on the other thread refernced the property has been let so the business has started.

Nicola_Ed

Hi

Below is the relevant section from my previous post.

Qualifying pre-commencement expenditure is treated as incurred on the day on which the taxpayer first carries on their rental business. This is deducted, together with the other allowable expenses of letting, from the total receipts of the business for that year.

Any pre trading costs are treated for tax purposes as being incurred on the day the rental income commences so there is no need to file a return until the tax year that you receive rental income.