Income from Rent

Conrad

The Govt is in process of reducing the amount of mortgage that can be offset against rent - remember what the audience says in all those TV political discussions - that they are happy to pay a little more tax for the NHS etc. Well it has to come from somewhere, but we always want that somewhere to be 'someone else' in reality.


So think of yourself as a jolly good citizen helping nurses get a pay rise, after all we all say that's what we want.


PS I am a Landlord. My plan is to increase rents if possible to cover tax rise costs being phased in, but obviously the market dictates the rent one can achieve.

Pixie5740

24shaw wrote: »

I don't pay Student loans fortunately, my employer paid for my studying.

Its the expenses part that I am now trying to get my head around, do agents fees count as an expense? Does the mortgage?

Is capital gains tax something I will need to worry about if I sell the house while its still rented?

Here's a novel idea, why don't you read the information in the link 00ec25 has given you? Then this starter for 10 on Capital Gains Tax.

https://www.gov.uk/capital-gains-tax/work-out-need-to-pay.

Once you've got your head around that you might want to read G_M's guidance for New Landlords taken from his Guide to Tenancies in England & Wales.

hazyjo

24shaw wrote: »

Hazyjo, that is an option I suppose. I just worry that in a year or so I might want to settle down in the house again.

It's the risk everyone takes when they move.


I'm hopefully off to the seaside this year. I'm taking the gamble that I won't want to come back to London and selling up. Absolutely no desire to be a LL with all it entails. You would prob get higher rents in the centre of Manchester so you could always do then what you're planning to do now - rent out whatever you buy and then come back out again.

24shaw

The trouble is, to purchase a flat in the city centre, where I want to rent is much more expensive than my three bed detached outside the city.

I have taken on board everyones comments (including the ones with hints of sarcasm) and I believe my calculations should be correct:

Income from the rental= £850
Management fee - £68
Interest on my Mortgage = £288

So £850 - £68 - £288 = £494

I then pay 40% tax on this £494 profit = £197

So I get £850, minus £68 fees, minus £197 tax:

850 - 68 - 197 = £585 income from the house. Enough to cover the rent and insurance, any additional fee's for boiler repairs etc I would have to do even if I lived there (unless the tenants are complete numptys).

00ec25

24shaw wrote: »

The trouble is, to purchase a flat in the city centre, where I want to rent is much more expensive than my three bed detached outside the city.

I have taken on board everyones comments (including the ones with hints of sarcasm) and I believe my calculations should be correct:

Income from the rental= £850
Management fee - £68
Interest on my Mortgage = £288

So £850 - £68 - £288 = £494

I then pay 40% tax on this £494 profit = £197

So I get £850, minus £68 fees, minus £197 tax:

850 - 68 - 197 = £585 income from the house. Enough to cover the rent and insurance, any additional fee's for boiler repairs etc I would have to do even if I lived there (unless the tenants are complete numptys).

incorrect. You cannot deduct the mortgage interest as a cost, you are a higher rate taxpayer so you only get tax relief at 20%
read: https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

insurance would of course be an eligible cost as explained in the link. Also remember, as explained in GM's guide, as a Landlord there are some costs that are not discretionary, for example you mention "boiler", so assuming that is gas powered, you are legally required to have an annual safety inspection. That is not the same as a service

you may also incur the deposit protection scheme fees depending on a) whether you take a deposit and b) which scheme you use

saajan_12

00ec25 wrote: »

incorrect. You cannot deduct the mortgage interest as a cost, you are a higher rate taxpayer so you only get tax relief at 20%

Incorrect. For the next 3 years, some of your mortgage interest gets 20% relief, some gets 40%. After that it will be all at 20%
2017-18: 75% of interest gets 40% relief, 25% gets 20% relief
2018-19: 50% of interest gets 40% relief, 50% gets 20% relief
2019-20: 25% of interest gets 40% relief, 75% gets 20% relief
2020-onwards: all interest gets 20% relief.

00ec25

saajan_12 wrote: »

Incorrect. For the next 3 years, some of your mortgage interest gets 20% relief, some gets 40%. After that it will be all at 20%
2017-18: 75% of interest gets 40% relief, 25% gets 20% relief
2018-19: 50% of interest gets 40% relief, 50% gets 20% relief
2019-20: 25% of interest gets 40% relief, 75% gets 20% relief
2020-onwards: all interest gets 20% relief.

not incorrect, the link I gave above fully explains the transition arrangements and should be read in detail. You cannot, as OP has written, claim all of the interest as a cost ...

Crashy_Time

24shaw wrote: »

The trouble is, to purchase a flat in the city centre, where I want to rent is much more expensive than my three bed detached outside the city.

I have taken on board everyones comments (including the ones with hints of sarcasm) and I believe my calculations should be correct:

Income from the rental= £850
Management fee - £68
Interest on my Mortgage = £288

So £850 - £68 - £288 = £494

I then pay 40% tax on this £494 profit = £197

So I get £850, minus £68 fees, minus £197 tax:

850 - 68 - 197 = £585 income from the house. Enough to cover the rent and insurance, any additional fee's for boiler repairs etc I would have to do even if I lived there (unless the tenants are complete numptys).

You can`t rely on rental income, it might not come in every month as planned.