offset property income tax against rented flat

random44

Hello,

I have a flat which I think I should rent ( I am currently living in it) as it is becommins small after we have a new born.

If I rent a flat and rent out my flat, should I still pay tax on my income on property i am currently living in when rented ?

For instance my flat could be rented from around 1000 and if I was to rent a bigger flat then it would cost me around 1200-1300 per month .

There is not much gain in the 1000 rent as all of it will go toward renting another place


Many thanks

CLAPTON

no way ..................

but you can offset the interest on the mortgage (if any) and other allowable expenses

holly_hobby

You will have to report your (net of permitted deductions) rental income via self assessment (which you'll have to register for if you currently don't report to HMRC via this medium), even if there is an effective loss or nil tax to pay.

Sorry ... !

Hope this helps

Holly

somethingcorporate

Haha, nice try (don't well all wish this was the case....?).

zygurat789

Look at it this way.

You accept that you will have to pay tax on any rental income you receive.
You already have your own personal living expenses, rent paid etc, which you accept you cannot claim against tax.
Logical ?

random44

makes sense but I think it is fair to say or introduce a law that if someone has only 1 property or 1 of the many if he is rich , and he is also renting then he can offset the income against as he is not making any money but loss which will be the case for me

Prothet_of_Doom

The only way to pay less tax, is to have a higher interest cost on the flat you are renting out. Or do repairs to it, that do not add to the capital value.

This is how I knew a mortgage broker was stupid, becuase having paid off my own mortgage, and wanting to take out a BTL on a new place, he suggested that I remortgage my current house, and use that to buy the BTL. Thus my extra profit on the BTL (as no interest) would incur more tax, but I'd be paying interest after tax on my own house. DOH.

00ec25

Prothet_of_Doom wrote: »

This is how I knew a mortgage broker was stupid, becuase having paid off my own mortgage, and wanting to take out a BTL on a new place, he suggested that I remortgage my current house, and use that to buy the BTL. Thus my extra profit on the BTL (as no interest) would incur more tax, but I'd be paying interest after tax on my own house. DOH.

err actually you have not understood that at all and the mortgage adviser was actually giving you a sensible alternative not being "stupid"

by taking a residential mortgage on your own home and using the money to buy a BTL the adavanatges are:
a) the interest rate on a resi mortgage will be lower than on a BTL mortgage so you will make more profit

b) the interest is allowable against tax for the BTL because the money was spent on a BTL

c) the terms of a resi mortgage may be easier to get since it will have a lower deposit requirement and may accept the equity in the property in lieu of a cash deposit - for the BTL you will have to find a cash deposit of minimum 25% and that cannot come from a loan so you need to raid your cash savings/ sell other investments to raise the cash

00ec25

random44 wrote: »

makes sense but I think it is fair to say or introduce a law that if someone has only 1 property or 1 of the many if he is rich , and he is also renting then he can offset the income against as he is not making any money but loss which will be the case for me

I think you would find that 99.9% of the UK population would regard that as being absolutely unfair , why should the taxpayer pick up the bill for the fact that you won't sell your second property becuase you may lose some money

and they complaint about Cameron's detachment from the real world!

grey_gym_sock

to be fair, a lot of ppl think that the changes to the tax system that would benefit them personally are only fair. it's a common delusion.

martinsurrey

Prothet_of_Doom wrote: »

The only way to pay less tax, is to have a higher interest cost on the flat you are renting out. Or do repairs to it, that do not add to the capital value.

This is how I knew a mortgage broker was stupid, becuase having paid off my own mortgage, and wanting to take out a BTL on a new place, he suggested that I remortgage my current house, and use that to buy the BTL. Thus my extra profit on the BTL (as no interest) would incur more tax, but I'd be paying interest after tax on my own house. DOH.

00ec25 wrote: »

err actually you have not understood that at all and the mortgage adviser was actually giving you a sensible alternative not being "stupid"

by taking a residential mortgage on your own home and using the money to buy a BTL the adavanatges are:
a) the interest rate on a resi mortgage will be lower than on a BTL mortgage so you will make more profit

b) the interest is allowable against tax for the BTL because the money was spent on a BTL

c) the terms of a resi mortgage may be easier to get since it will have a lower deposit requirement and may accept the equity in the property in lieu of a cash deposit - for the BTL you will have to find a cash deposit of minimum 25% and that cannot come from a loan so you need to raid your cash savings/ sell other investments to raise the cash

00e25 is spot on, the mortgage advisor was not stupid, far from it in fact.