Renting our your house- any advise on tax implications?

davecon1

Afternoon all

I have recently found out that it is highly likely I will be made redundant in 6 months time.

As I am relatively young, free and single I'm looking at this as an opportunity to travel as I have some savings and should get some money through redundancy.

My idea would be to rent out the house for a year minimum soo that even if I return early I could stay with friends or family.

Through saving for years I have managed to whittle down my mortgage so there is not much left and the 5 year term ends next June.

From what I understand about the tax laws I will have to treat the rent I receive as an income and have to pay tax on it (after rental expenses have been taken out).

Am i better off trying to increase my mortgage now so I can try to offset as much of the rental income against it and in theory pay less tax? I'm sure you can't count the capital repayment but can count the interest part as an expense? I might be completely wrong though so appreciate any opinions.

Thanks!

Thrugelmir

There's another way of looking at the situation.

If your not paying tax then you are unlikely to be making a profit (on renting out).

So don't get obsessed with the offsetting of interest.

jenand8285

You are correct, you can expense the mortgage interest but not the repayment. If the property is furnished you can claim 10% of the rental income (after deduction of rate and council tax) as an expense for wear and tear. You can then deduct insurance and fees etc from the taxable income.

And dont forget your personal allowance

davecon1

I'm not sure I follow you there. Even if I'm away won't this be treated as income and I will have to pay tax (after the personal allowance is taken into account- thanks Jenand for that point).