Letting out Flat - Mortgage and Tax implications?

Dusty_Moth

Hi all,

I hope someone can help me with this as I’m a little unsure what to do about this and the solicitor I spoke to has only confused me further!

I moved in with my other half in March, and rented my flat out for £550 a month directly to a friend. As I remortgaged at the same time, the lady at C&G said if she didn’t hear that I was going to rent the flat out I could get a much, much better deal on my mortgage, and as long as I let C&G know once it was settled, they would charge me the £100 admin fee, and change the flat to rented, and that would be that (I didn’t have enough equity to get a buy to let mortgage and couldn’t afford to stay with the one I had).

So far so good. I recently informed C&G, who wanted my solicitor to approve the contract, and take my fee. I spoke to a solicitor who approved my standard shorthold tennancy agreement and expressed surprise that I was letting on to C&G at all, as most people don’t. He also mentioned in passing that most people don’t mention it to the inland revenue either (the next people on my list).

As I understand it, you get tax releif on the interest on your mortgage if you are letting. My mortgage is interest only mortgage and my payment is about £500. The rent coming in is £550, but the ground rent/maintainance fees/insurance etc over the course of the year come to somewhere approximating £700 so the flat only just keeps itself ticking over (in fact, I make a slight loss).

Should I tell the inland revenue? My gut feeling is yes, as I’m a (fairly) law abiding citizen, but I’m a bit confused. Also, if I want to start overpaying my mortgage, does anyone know what sort of difference that would make?

Thank you for your help and advice!:beer:

dolce_vita

With regard to your mortgage; in legal speak, you have "gained a pecuniary advantage by deception"

In common language you have commited fraud by obtaining a residential mortgage on a property that you had every intention of letting. I'm surprised the woman at C&G turned a blind eye as she is now an accomplice.
Your solicitor should also have warned against it.

The best you can do, is inform them of the current arrangement and hope they don't take it any further.

You should also inform the taxman because even losses have to be declared.

good luck.

Dusty_Moth

Hiya,

At the time I remortgaged I was still living in the flat, and intended to for the next three months. I thought it was all a bit random at the time, but as it saved me in the region of £3000 a year, I figured I'd run with it :whistle: :rolleyes:

I've informed C&G and all that bit is straight now, and was intending to tell the Inland Revenue before my solicitor confused matters. Glad someone else doesn't think it's odd to be straight with these things and even if I do have to pay tax on it all I think I'd rather be straight now than it catching up later.

Bit worried about my solicitor, but there you go... :lipsrseal

silvercar

You really should inform the revenue as (a) you know you should (b) there won't be any tax to pay (c) you can carry forward the losses you are making to future years and so will have less tax to pay when you make a profit.

Applying for a mortgage with the intention of letting the place out is, as Dolce Vita says, fraud - obtaining money by deception etc
If you were living in the property and are now letting it, that "merely" is a breach or your original mortgage conditions and is a civil matter rather than a criminal offence.
Provided that you keep up with the repayments there is little likely action by your lender.

Guy_Montag

I'm quite worried about your solicitor too. !!!!!!, if solicitors are widely complicit in tax evasion it's a pretty poor lookout for the country.

1) I'd tell HMRC, they may come calling one day.

2) I'd find a new solicitor

Curv

silvercar wrote: »

If you were living in the property and are now letting it, that "merely" is a breach or your original mortgage conditions and is a civil matter rather than a criminal offence.

Unless the lender has been notified and has given their consent to the letting, in which case there is no breach.

I get the impression from the OP that this is what has happened.