Renting out Home to downsize

David_A_2

Now my family has grown up we feel it is time to downsize. To minimise the risk, I initially plan to rent out my main home and rent somewhere smaller & see if we can make living in a smaller house work.

My question is:
Is all of the rent I receive from my main house classed as income? or can I offset the rent I will be paying for my smaller house against this. i.e. only treat the differential in rents as Taxable income?

So, I own House A.
I rent out House A for £A per month.
I then move into smaller house B which I will be renting at a rate of £B per month.
Do I get taxed on amount £A or can I offset my new rent such that I am taxed on £A-£B?

I am trying to avoid making myself worse-off financially after downsizing!

Any insight gratefully received,

marksoton

I'd just sell and buy and be done with it.

Anything else is a PITA.

booksurr

you are far from the first person to think that way.

no - for exactly the same reason as you cannot offset the cost of the food you eat against the income you earn, you cannot claim the costs of where you shelter against the rent you earn. How you spend your income has nothing to do with how much tax you have to pay on the original income.

you need to do a lot more basic reading:
start with the gov website, paying particular attention to the tax pages
https://www.gov.uk/renting-out-a-property/landlord-responsibilities

then read every single word of every single linked page on GM's super guide to how to be a landlord. You have a huge amount to learn and it is you who is liable in law if you get it wrong

http://forums.moneysavingexpert.com/showpost.php?p=67759899&postcount=1

David_A_2

Thanks for the quick response. I had read all the Government info on being a Landlord. It was purely the issue of finding that I may not be able to afford to move somewhere smaller, as my rental income after tax may not cover my new rent.
Just feels stange that the Tax system may stop me from moving to a smaller house.

marliepanda

The tax system is not there to subsidise businesses (being a landlord is a business)

marksoton

David_A wrote: »

Thanks for the quick response. I had read all the Government info on being a Landlord. It was purely the issue of finding that I may not be able to afford to move somewhere smaller, as my rental income after tax may not cover my new rent.
Just feels stange that the Tax system may stop me from moving to a smaller house.

The housing system is now skewed to prevent multiple home ownership. Where have you been?!

Really? You sell a property but that doesn't release funds to rent?

David_A_2

I am renting out my house not selling it. So I will still only own one house. Just not the one I will be living in. - So nothing to do with the Government preventing multiple home onwership.

marliepanda

I don't think that's what marksoton is getting at. Thengovt is trying to discourage multiple home ownership, so why would they encourage someone keeping a property to rent by subsidising their own rent costs?

David_A_2

It just appears that the Tax system is encouragiung me to stay in a house that is too big for me. - It seems a rather strange idea when there is a general housing shortage.

I guess my only Tax efficient option will be to take out a BTL Mortgage so I can offset some of the interest against tax (at least for a couple of years) & then invest the money in a more tax efficient way.

Or just stay put in a house thats too big!

Thanks for your comments.

PersianCatLady

David_A wrote: »

Thanks for the quick response. I had read all the Government info on being a Landlord. It was purely the issue of finding that I may not be able to afford to move somewhere smaller, as my rental income after tax may not cover my new rent.
Just feels stange that the Tax system may stop me from moving to a smaller house.

You could afford to move somewhere smaller if you sell up and buy a smaller house.


This idea sounds crazy to me because if you couldn't afford to do it because of the tax implications then what would you do if your tenants didn't pay their rent or something happened to your house?

PersianCatLady

David_A wrote: »

It just appears that the Tax system is encouragiung me to stay in a house that is too big for me. - It seems a rather strange idea when there is a general housing shortage.

I guess my only Tax efficient option will be to take out a BTL Mortgage so I can offset some of the interest against tax (at least for a couple of years) & then invest the money in a more tax efficient way.

Or just stay put in a house thats too big!

Thanks for your comments.

The tax system isn't encouraging you to do anything.


If you want to live in a smaller house, sell up and buy one.