Tax implications of consent to let

penelope26

I'm just wondering if anyone can help. I have a property that I've been trying to sell since April (I had to move into rented accommodation in another city due to redundancy). I recently had an offer which fell through and keeping up payments on an empty property is becoming a strain. I'm now thinking I should probably consider renting it out but I'm not entirely sure what the tax implications are. It looks as though I'll also become liable for paying capital gains tax and 40% tax on the rental income, is there anything else I'm missing?

booksurr

if your new job in the other city means you are a higher rate taxpayer then yes you will pay 40% tax on the rental profit (not the income). Rental income is taxed at your marginal rate, it is not simply taxed at 40% per se

as a higher rate taxpayer you will not be able to claim the full cost of the mortgage interest. Instead it is limited to relief at basic rate only - although we are currently in a transition period so the full effect of that rule does not happen until 2020

if you buy a new property whilst still owning the old one you will have to pay the 3% SDLT rate because you have purchased an additional property (you have gone for 1 to 2 owned properties). If you sell your old one within 3 years of buying the new home you can then get the extra SDLT refunded. Take longer than 3 years and no refund is allowed.

unless your empty property is worth £millions and/or you take decades to sell it is improbable you will have to pay CGT, although you most certainly would be liable. That is because you will get loads of tax relief in the form of private residence relief , plus letting relief, plus your CGT allowance meaning your net taxable gain will be negligible, or most likely zero.

Savvy_Sue

Becoming a landlord isn't a trivial choice these days, so before you commit to that route consider whether or not there's a strong rental market in that area for that type of property.