Rent a totally paid off property

nzhang6666

Just curious what tax etc needed to pay if I rent a totally paid off property to someone? Current situation is I can buy to let in a big city (London) with mortgage or buy one off a property in some other place. Big city will bring more rent of course but I will also need to pay lot of other stuff, so what about the rules for property that has been paid off?

booksurr

no difference in principle: taxable profit = total income - total costs

the main factor is whether you are a higher rate tax payer. If you are then as from 2016 the rules re eligibility of mortgage interest as a cost change meaning it will be significantly more expensive to let a mortgaged property, and by 2020/21 it may be cash negative if you are highly geared

if you are (and will remain) a basic rate taxpayer then (at the moment) the above will not affect you - however BTL is a target very much in the Govt's sights for future tax raising

if you don't understand the above then you have not done enough research yet and should get advice from a professional such as an accountant rather than going in blind

theartfullodger

There's over 10 taxes a landlord may pay: Too often we just worry about Income Tax (brought in to pay for fighting the French....)... see
http://www.landlordzone.co.uk/forums/showthread.php?49095-How-many-taxes-can-a-landlord-have-to-pay

You probably wish to be liable for CGT (as in it would be nice for there to be a capital gain to argue about... )

AdrianC

Yes, a London flat will bring more rent - but will it bring a higher yield? If you don't understand the difference, then you need to do a LOT more research. Search for G_M's excellent guide to new landlords, or any of the million-and-three similar guides and websites.

macman

Your rental income is subject to income tax regardless of whether you have a mortgage on the property or not. What is different is what you can set against tax by way of legitimate expenses.
As above, sounds like you need to do a lot more basic research.

G_M

If you have a mortgage, the interest repayments (not capital repayments) can be offset against income tax liability.

Obviously if there is no mortage, you cannot offset so will pay more IT on the rent.

The two main taxes will be
* Capital Gains Tax
* Income Tax


Read also:

* New landlords: advice, information & links

* Letting agents: how should a landlord select or sack?


both from this thread:


* Tenancies in Eng/Wales: Guides for landlords and tenants