Renting our house while away.

Jimble

We are going abroad for 3 or 4 years, and renting the house out. We have got tenants through our estate agency and all seems fine. Can anyone advise on the tax implications (I will still be being paid in the UK and the other hald won't be working, although she has been on 40% tax up until now). We currently have an offset mortgage, would we be better off getting a shorter term mortgage to increase our interest payments which I believe can be offset against any capital gain? Also can we claim back costs for getting the house in a state fit for rental? Any other tips gratefully received. BTW this is our only house, does that mean we will have to switch to a buy to let mortgage?

clutton_2

your letting/managing agent will have to deduct tax from your rental income. you will need a BTL mortgage. you can claim many expenses against rental profit - which include management fees; redecoration; accountants fees; bank mortgage interest payments, insurance; CORGI gas inspection travel to and from the property etc

IveSeenTheLight

I moved abroad last year and was in the exact same position as you describe.

To answer your questions: -

Jimble wrote: »

Can anyone advise on the tax implications (I will still be being paid in the UK and the other hald won't be working, although she has been on 40% tax up until now).

Although out of the country, you will be liable to pay tax on your UK rental income, however most if not all can be offset against interest payments, maintnance, EA fees, Solicitor fees, etc etc etc.
If the property is jointly owned then the profit would be split 50 - 50 with you and your wife.
One option is to put the house in her name as she will be entitled to around 4,500 tax free profit before she would have to pay tax, however you should not need to bother with this if you keep your accounts correct.

Jimble wrote: »

We currently have an offset mortgage, would we be better off getting a shorter term mortgage to increase our interest payments which I believe can be offset against any capital gain?

If you have higher interest payments then this will offset against the rent, however don't be dissillusioned to thinking increasing your payments by shortening the period will mean you are paying more interest. Actually as you are payig more, it will go towards capital and actualy reduce your interest payments. The only way to increase the interest is to either lengthen the mortgage or take out a higher LTV, not something I would recommend

Jimble wrote: »

Also can we claim back costs for getting the house in a state fit for rental?

Yes, most definately. Keep all receipts, even small ones for replacing light bulbs etc. It all gets deducted from your profit. Also bear in mind that if you make a loss (rent does not cover interest, maintenance fee's maintenance etc etc) this can be offset for up to 5 years tax returns

Jimble wrote: »

BTW this is our only house, does that mean we will have to switch to a buy to let mortgage?

It will depend on your mortgage lender, some will be happy to leave as is as long as the payments are met, some will allow you to rent out for a short time (about a year or two) and some will say that their mortgage is not for BTL and you must switch.

Jimble wrote: »

Any other tips gratefully received.

• Make sure you get tenant references and a credit check.
• Sign up to the various landlord forums and websites and do a lot of reading to get up to speed with the requirements i.e. Tenancy Deposit Scheme, Landlord registration schemes etc
• Make sure you have adequate building / content insurance.
• This is your home, so you want it to be looked after. Generally I have found if you are a very good landlord then generally tenants are very good back to you and your house. I do little things like leaving a bottle of wine and a card welcoming new tenants, sending christmas cards etc to maintain a good relationship. Above all, make sure your home is properly maintained. If there is anything that goes wrong in your home, get it fixed as soon as possible. This all helps to keep the tenant happy and therefore keep them looking after your house and paying on time. If the tenants like the house and believe they have found a good landlord, then they are more likely to stay and look after your house.

On other issues: -

• Register to receive a non tax code with the government.
• Register you bank accounts to receive gross interest
• Get your mail forwarded to your new address through Royal Mail
• Keep all your receipts as you will need to complete a tax return form after each April.

Hope this helps

clutton_2

if you are resident abroad then you have to have a UK managing agent legally.

IveSeenTheLight

clutton wrote: »

if you are resident abroad then you have to have a UK managing agent legally.

And by UK managing agent, it could be anyone, not necessarily a letting agent.
You just need a point of contact.
In my case it's my in-laws.

IveSeenTheLight

Oh, you will need to complete an NRL1 form (Non Resident Letting form)

Jimble

Many thanks to everyone who has replied!;)
(i'm at work and the "THANKS" Button doesnt work, i'll do that later.

Jonbvn

Have a look a the The Non-resident Landlords Scheme on the HMRC website.

Notlob

clutton wrote: »

if you are resident abroad then you have to have a UK managing agent legally.

First I have heard of this.

Considering the Inland Revenue put the responsibility on the agent, OR THE TENANT if no agent collecting rent, to withhold tax until a NRL8 has been issued, I would question the above statement.

GMAC-UK

interesting point reading the post, just arranging for an EPC for my normal property i'm selling, and reading the regs, looks like i will need one for my rental as well from next april. So if your going abroad then best get one done before you leave. For rentals they will last 10 years regardless of change of tenant. Also, as i mentioned on another post, you can claim back over a grand on energy improvements. (up to a max of £1500). get the epc done though before the rush, certainly before you leave for abroad (the letting agency one will undoubtably be expensive - so use an independant) - anyone interested i can pass on details.

clutton_2

"" You just need a point of contact. In my case it's my in-laws."

exactly so - someone in the UK to manage the CORGI or other emergency and repairs and someone to collect the rent