Taxes on BTL INCOME.

Joy_mate

Hi all.
If anyone can advise me as precise as possible.
Thank you in advance.
I am basic tax payer.
BTL property income - £1250 pm
Mortgage - £769 pm
Gross - £481..so what kind of UNAVOIDABLE taxes and expenses need to deduct to reach at net profit? And how much?
Thank you again.

G_M

You need a lot more info. eg mortgage interest?

Since I suspect you are new to letting, and relatively naive, I suggest you start here:

* New landlords: advice, information & links

If you want tax advice "as precise as possible" I suggest an accountant.

pathtofreedom

That's not enough information, are you thinking about being a landlord and that's why you're posting? You need to read a lot of guides to learn about your responsibilities and how to run a business first I think. Things like insurance, safety checks, your responsibility to confirm your tenants immigration status etc etc. Work out what yield you're likely to make, especially with the tax changes being phased in against the mortgage interest and wear and tear etc to see if it is cost effective to run this business as well as factoring voids, non payment, possible eviction fees and repairing damage etc.

tacpot12

The essential expenses you need to deduct:
Maintenance & Repairs
Safety Inspections (Gas, Electrical, Legionella)
Insurance Premiums
Letting Agent Fees (if you use an agent, but if you don't, you will have other expenses such as Advertising, Tenant Referencing and Legal costs to review Tenancy Agreements.
End of Tenancy Cleaning
Bank Account Fees

I would guess a figure for tax allowable expenses of about £200/month for your property if a letting agent is used, but this is a very rough guess.

Note that only Mortgage Interest is deductible as expense for tax purposes, and even this is being phased out over the next four years. See https://www.landc.co.uk/mortgage-guides/tax-buy-to-let-property/ for details.So in four years time you will be paying tax on £12,600 of income per annum.

booksurr

tacpot12 wrote: »

I would guess a figure for tax allowable expenses of about £200/month for your property if a letting agent is used, but this is a very rough guess. OP is asking for precise figures, not your best guess

Note that only Mortgage Interest is deductible as expense for tax purposes, and even this is being phased out over the next four years. See https://www.landc.co.uk/mortgage-guides/tax-buy-to-let-property/ for details.So in four years time you will be paying tax on £12,600 of income per annum. not possible to say that given the few details available at present

- we do not know if his mortgage is interest only,
- we do not know if all the interest is allowable (eg. the loan may be on another property and he may have borrowed more than the value when first let)
- we do not know if he will become a higher rate taxpayer when the gross rent is recalculated, so he may be taxed on more than your hypothetical 12,600

tacpot12

The mortgage being Interest Only or Capital & Repayment makes no difference. Only the mortgage interest is deductible.

The OP asked for advice that was as accurate as possible. Given the details the OP provided, I have been as accurate as I can be; which is an educated guess.

If he is a higher rate tax payer, he will still be charged tax on the net income after tax. The OP didn't ask us to work out his tax bill, he just asked us to advise him what the net income would be.

booksurr

tacpot12 wrote: »

The mortgage being Interest Only or Capital & Repayment makes no difference. Only the mortgage interest is deductible. Correct, however as i said there are certain instances where not all the interest on a loan is allowable.

The OP asked for advice that was as accurate as possible. Given the details the OP provided, I have been as accurate as I can be; which is an educated guess. you have totally ignored his mortgage cost and come up with £200 a month as "costs". Guess yes, accurate no

tacpot12 wrote: »

If he is a higher rate tax payer, he will still be charged tax on the net income after tax.

that does not make sense!
Bear in mind that the new rule is the relief is a tax reducer, it is not an allowable cost as before, so his pre tax rental profits will significantly increase and may therefore push him to the point where he incurs higher rate tax on his total income, in which case he will only get that tax bill reduced at the basic rate

tacpot12 wrote: »

The OP didn't ask us to work out his tax bill

yes he did, he asked for:

Joy_mate wrote: »

... precise calculation of ...taxes and expenses need to deduct to reach at net profit? And how much?

as stated no one can answer that without a whole heap load more info