Can I rent out my property?

Charmagpie13

Hello all,
Firstly, apologies if this is not appropriate for this forum, or has been discussed elsewhere... do let me know if I need to take this post down.
In a nutshell... I co-own a flat with my husband, whom I am separating from. It is likely I will be able to take over the mortgage myself. Now I would like the option of renting the flat out and renting myself a place in another part of the country. I earn £30000 pa in my full time job, and would be expecting to rent my flat out for about £750pm. The mortgage is currently £644pm. However I'm getting a bit unstuck when it comes to paying tax on rental income, so if anyone knows approx what I could be taxed, and if I'm likely to break even/turn a profit, I'd be grateful.
Kind regards x

Marvel1

First you would you need permission from your lender.

Do you know what the responsibilities of being a landlord are? What rights tenents have? If not then read up on this and understand it, getting it wrong is costly, and it can determine whether you still want to be a landlord.

I can't comment on the tax or profit as I don't know.

molerat

If on a residential mortgage you would need the permission of the lender to rent out.

When working out your profit for tax purposes you can claim the interest on the mortgage plus any costs such as insurances, agent charges, safety checks etc.

Assuming England and Wales see GM's useful guide here http://forums.moneysavingexpert.com/showpost.php?p=67759929&postcount=7

Pixie5740

You don't simply take over a mortgage. You would need to apply for a mortgage in your name only and given that your intension is to let the flat out it's likely you will require a BTL mortgage.

Only the interest portion of your mortgage payment is deducted when calculating your income tax, not the capital repayments. Then there are the other expenses of letting a property, insurance, gas safety certificates, tenant finding fees, letting agency fees (if you use one), landlord association fees (if you join one), routine maintenance, repairs, etc, etc. Without knowing how much you will be paying for such things it is impossible for anyone here to estimate your tax or if you'll even make a profit.

It's not particularly tax efficient to let a property out whilst paying to rent somewhere yourself. It makes more sense in terms of Capital Gains Tax and Income Tax to buy your home unless you're in the position where it is likely that you will be moving around a lot.

Cakeguts

Would you be able to afford to pay the mortgage on the flat and the rent on your next place without getting any rent? You have to be able to do this if you are considering letting a property because you may get a tenant who doesn't pay any rent or you might have a period when the property is vacant between tenants. If you can't pay the rent on your next place and the mortgage on the flat for at least 6 months (possible time to get possession from a non paying tenant) don't do it. Sell the flat.

Crashy_Time

Sell it, leave renting out property to professional landlords.

00ec25

Crashy_Time wrote: »

Sell it, leave renting out property to professional landlords.

ignore this poster, he is just bitter because he lacked the foresight to make a profit from letting himself

csgohan4

00ec25 wrote: »

ignore this poster, he is just bitter because he lacked the foresight to make a profit from letting himself

Or the foresight that tax changes will hit profits of letting themselves

Marvel1

00ec25 wrote: »

ignore this poster, he is just bitter because he lacked the foresight to make a profit from letting himself

Their reasons aside, they do make a point, it's not fair on tenants when they have landlords who don't know what they are doing.

AdrianC

Charmagpie13 wrote: »

I earn £30000 pa in my full time job, and would be expecting to rent my flat out for about £750pm. The mortgage is currently £644pm.

I'm going to guess that's repayment. How much is the mortgage, and what LtV would you be looking at?

You'd be looking at getting a mortgage in your sole name - and, if you're planning on renting, it'd need to be a BtL, rather than a residential then consent to let. So, roughly, 75% max LtV, and chunkier interest rates than residential.

However I'm getting a bit unstuck when it comes to paying tax on rental income, so if anyone knows approx what I could be taxed

You would pay income tax, at your normal rate, on the profit. The profit is the rental income minus all the allowable expenses. Mortgage interest would be allowable, repayments not. Then there's all the other costs - you're moving to another area, so you're going to be needing to pay an agent to manage it. Refurb costs. Voids. Bad debts and damages. Gas safety. EPC. etc etc etc...

and if I'm likely to break even/turn a profit

A LOT more information needed...

Even if it does turn a profit, is it a good investment? Short-term, what % return on your capital? Long term, will growth (after CGT) outstrip other investments? Is it worth the blood pressure? Will it affect your options in other directions - such as buying your home in the area you're moving to?

Crashy_Time

cjdavies wrote: »

Their reasons aside, they do make a point, it's not fair on tenants when they have landlords who don't know what they are doing.

It is even worse for the landlords, especially since the government seem to have them lined up for some extra tax punishment.