Letting a flat.

Wrighty1977

I’ve been thinking about letting my flat and was wondering how much tax I have to pay. I work full time and earn between £11,500 and £45,000. I think I could get at least £700 per month. My mortgage is £426 and I pay £70 management fees and £25 to British Gas for a homecare agreement per month. Does anyone have a rough idea?

anselld

Wrighty1977 wrote: »

I work full time and earn between £11,500 and £45,000.

You will need to be more specific as that range of incomes would give very different results.

Wrighty1977

I earn £35,000 a year.

anselld

Wrighty1977 wrote: »

I earn £35,000 a year.

OK, so £700 - £70 - £25 = £605 per month income before finance (£7,260).

£35,000 + £7,260 is still within lower rate band assuming you have no other income, so you can deduct full finance cost of £5,112.

£7,260 - £5,112 = £2,148

£2,148 @ 20% = £429.60 Tax.

00ec25

anselld wrote: »

OK, so £700 - £70 - £25 = £605 per month income before finance (£7,260).

£35,000 + £7,260 is still within lower rate band assuming you have no other income, so you can deduct full finance cost of £5,112.

£7,260 - £5,112 = £2,148

£2,148 @ 20% = £429.60 Tax.

I agree:
- he will still be a basic rate taxpayer
- that, in cash terms, he is paying £5,112 for his mortgage

however.... as we do not know how much of the 5,112 is interest, the tax bill will not be 429.60 as you have assumed the whole lot is interest - if it is a repayment mortgage then he will not get tax relief on the full 5,112

Wrighty1977

Thanks for your replies. It is a repayment mortgage. I also have the chance of overtime which would take my salary to £41,000. How much of an impact would that and a repayment mortgage have?

G_M

Links to all the HMRC gudance in this post:

* New landlords: advice, information & links

* Letting agents: how should a landlord select or sack?

Wrighty1977

Thanks for the links. If the money from the let took my income above £45,000 would that affect the tax I pay on my wages?

00ec25

Wrighty1977 wrote: »

Thanks for the links. If the money from the let took my income above £45,000 would that affect the tax I pay on my wages?

if you go into the higher rate threshold then of course it impacts the tax you will pay, durr. Why don't you read up on how income tax works:

https://www.gov.uk/income-tax

https://www.gov.uk/income-tax-rates

https://www.litrg.org.uk/tax-guides/tax-basics/how-do-i-work-out-my-tax

do the course on how to calculate letting profits:
http://www.hmrc.gov.uk/courses/syob3/new_letting/HTML/new_letting_menu.html

and pay particular attention to the rules on mortgage interest for higher rate taxpayers
https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income

agrinnall

What your mortgage is now is largely irrelevant as even if your provider grants you consent to let for the current mortgage it may well be at a higher interest rate, and if you are looking at letting as a long term business (and it is a business) then you'll need to switch to a buy to let mortgage.

Wrighty1977

Thanks for your comments. I!!!8217;m aware I would have to pay more tax on the money I get from letting my flat but would I have to pay more tax on my regular income too?