Accidental Landlord: help pleaseHi

Star_Gazer

Hello all,

Hopefully someone can help me out, as a result from a split i've now got a property which i'm letting out.

My question is in regards to getting the tax right... i'm confused by rules & regs so hoping someone can clarify my position below.

If I let my property at £1,100 per month - and my mortgage is £800 (repayment) how much of the mortgage can be deducted?

EG: Will I pay tax on the £1,100 or £300 remaining once mortgage deducted?

Thanks in advance,

pramsay13

I think you have a lot of research to do as being a landlord is full of responsibilities, not just for getting the tax right.
You cannot claim the repayment part of the mortgage as an expense, you can claim the interest part of it although the rules have changed this year so the amount you can claim varies.

Pixie5740

Star_Gazer wrote: »

Hello all,

Hopefully someone can help me out, as a result from a split i've now got a property which i'm letting out.

My question is in regards to getting the tax right... i'm confused by rules & regs so hoping someone can clarify my position below.

If I let my property at £1,100 per month - and my mortgage is £800 (repayment) how much of the mortgage can be deducted?

EG: Will I pay tax on the £1,100 or £300 remaining once mortgage deducted?

Thanks in advance,

Accidental landlord. Get your tin hat on!

You can't claim relief on the capital payment of your mortgage. How much relief you can claim on the interest portion depends....

https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords

https://www.propertygeek.net/article/mortgage-interest-relief/

Star_Gazer

Thanks for the response, I have that element covered as it's via a high street agent.

So on that basis my tax (20%) will effectively be on the full mortgage (2.7% interest) which equates to £2,640 ... I can see why people don't want BTL anymore because this is costing me money each month based on this!

chanz4

Yup and even great fees from your letting agents

Star_Gazer

Not sure what you mean by this!

Marvel1

Star_Gazer wrote: »

Thanks for the response, I have that element covered as it's via a high street agent.

Means nothing, the responsibility still lies with you e.g. deposit not protected, it won't be the letting agent being claimed 1x - 3x the penalty it will be yourself.

Start here being in the landlord business:
https://forums.moneysavingexpert.com/discussion/5180214/tenancies-in-eng-wales-guides-for-landlords-and-tenants

anselld

Star_Gazer wrote: »

Thanks for the response, I have that element covered as it's via a high street agent.

So on that basis my tax (20%) will effectively be on the full mortgage (2.7% interest) which equates to £2,640 ... I can see why people don't want BTL anymore because this is costing me money each month based on this!

Repaying capital is not a cost. So it cannot be costing you money.

If you are letting at 1100 per month and interest is 2640 then for example ...

Income £13200
Finance cost £2640
Agents fees eg £1320

Profit £9240
Tax £1848

... assuming you remain a 20% taxpayer. There will be other deductible costs, eg insurance, maintenance, etc.

You are a long way from it "costing you money".

Star_Gazer

My calculations:

Income of £11,990.40 (after agents fee) which would be taxed at £4,796.16 on 40% then minus mortgage of £8,705.28 = £1,511.04 DEFICIT

On top of this I have receipts totalling £1,500 (painting / skips / boiler service / repair work)

Please correct me on the above, as I said before I am lost with this...but it seems I set me make a loss!

LateStarter

I think you're coming at this from the wrong angle; you have a property with a mortgage on it - if you intend to keep the property then you need to pay this mortgage. You do NOT have a debt-free property, where you can take the rent as your own income.


You've fallen into the trap of thinking that property rental is somehow easy money; hopefully this thread will open your eyes a bit. Your really need to understand how it works, and if it's suitable for you (ans most likely it's not).

ThePants999

Star_Gazer wrote: »

Income of £11,990.40 (after agents fee) which would be taxed at £4,796.16 on 40% then minus mortgage of £8,705.28 = £1,511.04 DEFICIT

If your mortgage is £8,700 a year, of which £2,640 is interest, then the remaining £6,060 isn't a cost to you, it's a capital transfer. You're changing £8,700 in cash into £6,060 in equity, so you're only losing £2,640.