Tax from renting when most of rent goes into paying off mortgage

AnotherJoe

lesterxburnham wrote: »

IAll I want is someone to pay off my mortgage and I don't want to lose money. Which is the reason why I'm asking how to figure out how much rent should I charge so I'm on zero after paying tax and whatever else I need to pay to HMRC.
.

So you’d better also include maintenance expenses, void periods, insurance, any leasehold and management costs, cleaning costs for new tenants.

Pixie5740

AnotherJoe wrote: »

So you’d better also include maintenance expenses, void periods, insurance, any leasehold and management costs, cleaning costs for new tenants.

The property is in Scotland and is therefore not leasehold. Nor is there any ground rent as someone else suggested earlier.

Crashy_Time

Cakeguts wrote: »

It isn't giving you £400 a month because that goes on repaying the mortgage. You are losing money each month. All that needs to happen is that you get a bad tenant and then you will lose a seriously lot of money.

Because you didn't do any research you are trying to make a profit on a property that isn't suitable as a rental property.

And the value of the property will probably sink if there are rate hikes or recession up ahead.......double bad.

00ec25

Crashy_Time wrote: »

And the value of the property will probably sink if there are rate hikes or recession up ahead.......double bad.

there is nothing like a post from Crashy to make me smile so much at the thought that there really can be such fixated people as him :rotfl:

[Deleted User]

I think this thread is one to give up on if the OP thinks the £400 rent income is profit (not taking off what he has to pay on his mortgage, interest, renting costs etc). Something not right here.

getmore4less

Pixie5740 wrote: »

The property is in Scotland and is therefore not leasehold. Nor is there any ground rent as someone else suggested earlier.

factor fees very common.

getmore4less

deannatrois wrote: »

I think this thread is one to give up on if the OP thinks the £400 rent income is profit (not taking off what he has to pay on his mortgage, interest, renting costs etc). Something not right here.

Could be a crashy type pretending to be a dumb landlord to show how landlords are subsidising renters nd there i no money in this renting out property game.

Pixie5740

getmore4less wrote: »

factor fees very common.

Q) What do factoring fees have to do with leasehold properties or ground rent?

A) Nothing

As for factoring fees, the use of factors varies greatly depending on geographical location. For example, buildings are more likely to have a factor in Glasgow whereas in Aberdeen it is very unusual to have a factor unless you have a new build flat.

00ec25

deannatrois wrote: »

I think this thread is one to give up on if the OP thinks the £400 rent income is profit (not taking off what he has to pay on his mortgage, interest, renting costs etc). Something not right here.

please define "profit"

- taxable profit?
- cash left over after all payments have been made?
- reduced amount still needed to pay towards mortgage after all other costs have been paid?

OP has several times pointed out that having a cash contribution from a tenant towards his mortgage capital repayments cost is, in is eyes, a positive. Yes we all agree that if that means the OP still has to make up a shortfall on his mortgage payment the economics of his situation do not make financial sense, particularly if, because of the taxation of higher rate taxpayers, he's also had to pay out tax on a negative cashflow.

Nonetheless, he is, as Crashytime so detests because he can't do it himself, having someone else "pay off" or at least "pay down" his mortgage.

getmore4less

00ec25 wrote: »

rental profit after non finance costs and partially restricted mortgage interest = 1,925


tax payable 1,925 x 40% = 770
add back 25% balance of mortgage interest relief capped at 20%: (7*300= 2100 x 25% = 525. check if £525 is less than the property profits (1,925), yes it is, therefore use finance costs not deducted above in capped relief calculation: 525 x 20% = 105

net post tax profit in cash terms: 1,925 - tax (-770 + 105) = 1,260

the net cash after interest and expenses is (£530-£300)*7 - £210 = £1400

then remove the net tax £665

net post tax profit in cash terms £735.


very easy to forget to take off the 25% of interest not deducted in the net profit calculation for tax......