Tax on rental income: is my calc correct?

GMNN

Trying to work the numbers for renting out my property if I go on expat assignment in ~1 year from now.. Assuming I keep my current repayment mortgage the same (obviously subject to the lender granting CTL), and assuming I use a lettings agency to find tenants and manage the property. Have read the HMRC pages on rental income, and just wanted to check my calculation was correct.

Assuming rent of 1400/month = 16,800/year

Assuming the following costs for me:
Monthly mortgage repayment: 1535, of which ~400 is interest -> 4800/year
Service charge: 200/quarter = 800/year
Landlords insurance (estimated): 200/year
Gas checks / certificates (estimated): 75/year
Property management fees (estimated 15% of rent): 2520/year

I pay higher-rate tax, and for simplicity let's assume I will start renting out from April 2020. My calculation for rental income tax is as follows:
(16,800-800-200-75-2520)*0.4 - 4800*0.2 = 4322

Yes, I know the 4800 of interest is not exact as interest will go down progressively each month.. And obviously this assumes there are no periods of vacancies, and no maintenance charges included in case the tenants break something (or boiler breaks down..). But, is the formula I'm using above correct for estimating my annual tax due on the rental income?

Thanks

Dazed_and_confused

Will you still be liable at higher rates, before the rental income, if you leave the UK?

GMNN

I'm not sure yet - my wages would still be paid in the UK but not sure if I would be considered a UK resident for tax purposes.
Let's assume, worst case scenario, I would still be liable for higher rates..

00ec25

GMNN wrote: »

I pay higher-rate tax, and for simplicity let's assume I will start renting out from April 2020. My calculation for rental income tax is as follows:
(16,800-800-200-75-2520)*0.4 - 4800*0.2 = 4322
Thanks

correct

let us hope those are made up numbers given the yield they produce :eek:

Sibbers123

Well, you will get a deduction for 50% of the interest in 2018/19 as an expense (deducted from rental income) and 50% will attract income tax relief via a basic rate income tax reducer.

This will go down to 25%/75% in 2019/20 and to 100%/0% in 2020/21.

If you become non-resident, you will need to consider the non-resident landlord scheme.

00ec25

Sibbers123 wrote: »

Well, you will get a deduction for 50% of the interest in 2018/19 as an expense (deducted from rental income) and 50% will attract income tax relief via a basic rate income tax reducer.

This will go down to 25%/75% in 2019/20 and to 100%/0% in 2020/21.

If you become non-resident, you will need to consider the non-resident landlord scheme.

OP seems aware of that already hence their question starts with from April 2020

in grammatical terms, since you mention interest deduction first and tax relief second, then you should have written: This will go down to 25%/75% in 2019/20 and to 0%/100% in 2020/21.

GMNN

00ec25 wrote: »

correct

let us hope those are made up numbers given the yield they produce :eek:

Thanks for checking my calculation.


And no, these are real numbers! Yes, the yield looks bad, but I'm only trying to compare the financials between keeping the property empty while I'm on expat assignment (for 18-36 months) OR renting it out. I'm not doing this as a way to make money...

Obviously both options will "cost" me, but by renting it out I will "save" about 1k/month vs keeping it vacant... The question then becomes if that is enough incentive to go through the hassle of renting it out, dealing with tenants, risk of damage, CGT implications etc...

00ec25

GMNN wrote: »

The question then becomes if that is enough incentive to go through the hassle of renting it out, dealing with tenants, risk of damage, CGT implications etc...

indeed, quite a question

Sibbers123

Forgive me, it was early!