Renting out residential property - tax!

tom9980

stig22 wrote: »

Thanks all and apologies if a slightly naive question, very new to this and trying to get my head around it.

The issue with selling is I am only a year into a 2 year fixed rate mortgage (hadn't anticipated selling within the 2 years) so looking at an early repayment fee. Guess it's balancing that up versus the cost of renting...

Well generally an estate agent wants a months rent or so to do a tenant find so that is probably close to the early redemption fee.

You say you are moving with your job is this a relocation with the same employer? They should be offering a relocation package in some circumstances.

gingercordial

stig22 wrote: »

Thanks all and apologies if a slightly naive question, very new to this and trying to get my head around it.

The issue with selling is I am only a year into a 2 year fixed rate mortgage (hadn't anticipated selling within the 2 years) so looking at an early repayment fee. Guess it's balancing that up versus the cost of renting...

Any chance you can port the mortgage to buy somewhere in the new location?

If you go down the renting route, and lose money (which you certainly will when you factor in all the other costs that posters have mentioned) but think you can stand that for a year until the fix expires, what then happens when the tenant won't leave after a year? They don't have to. They could stop paying rent and wait for you to evict, and you're losing far more money during that process. They might trash the place. And you can't realistically sell for anything like the market price with a tenant in situ (particularly not an unfriendly one) so will either have to wait until they've gone and suffer a void, or sell for a cheaper price to an investor. All of this will probably add up to more than your early repayment charge.

However one thing you have got wrong is saying that it is the capital repayments that will cause you to lose money. Those capital repayments are not an expense, and are not lost. They increase the equity in the property, so are still "yours", just not in cash. Of course you do need a plan to cover the cash flow.

AnotherJoe

Just to add to the "dont don't it" consensus, a few additional reasons not to.
1. It will handicap you (financially and logistically) buying a new house should you wish to.
2. A remote BTL is much more expensive to manage. What might be a cheap repair you can DIY becomes a one hour callout to pay for someone to do a five minute job, say, replace a doorknob or whatever.
3. It's additional stress you don't really need when moving to a new area

I suggest you just swallow the early redemption charge as peanuts compared to what you'd spend to start up a letting business and it's a one off cost.

AdrianC

stig22 wrote: »

The issue with selling is I am only a year into a 2 year fixed rate mortgage (hadn't anticipated selling within the 2 years) so looking at an early repayment fee. Guess it's balancing that up versus the cost of renting...

Will you even get consent to let?

stig22

Final question...in a scenario where I find a friend who can move in and cover my rent I assume this a big no no in the eyes of HMRC. I.e I don't change my mortgage or get consent to let and my friend simply pays me the £1300 to cover my mortgage whilst I live elsewhere without paying tax.

No sort of magic legal loophole I don't know about I guess...worth a try.

AnotherJoe

stig22 wrote: »

Final question...in a scenario where I find a friend who can move in and cover my [STRIKE]rent[/STRIKE] mortgage ? I assume this a big no no in the eyes of HMRC. I.e I don't change my mortgage or get consent to let and my friend simply pays me the £1300 to cover my mortgage whilst I live elsewhere without paying tax.

No sort of magic legal loophole I don't know about I guess...worth a try.

As long as you pay HMRC whats due they wont care about the mortgage / consent to let issue. Its nothing to do with them.

If you do it under the covers you are letting yourself in for a whole potential world of hurt regards HMRC, insurance & mortgage fraud, yada yada yada.

Please just dont go there.

AdrianC

stig22 wrote: »

Final question...in a scenario where I find a friend who can move in and cover my rent I assume this a big no no in the eyes of HMRC. I.e I don't change my mortgage or get consent to let and my friend simply pays me the £1300 to cover my mortgage whilst I live elsewhere without paying tax.

No sort of magic legal loophole I don't know about I guess...worth a try.

They're still your tenant.
Whether the rental payments come to you directly or whether they go straight to your lender is irrelevant. They are payment for the service provided.

gingercordial

stig22 wrote: »

Final question...in a scenario where I find a friend who can move in and cover my rent I assume this a big no no in the eyes of HMRC. I.e I don't change my mortgage or get consent to let and my friend simply pays me the £1300 to cover my mortgage whilst I live elsewhere without paying tax.

No sort of magic legal loophole I don't know about I guess...worth a try.

This is tax evasion and illegal.