Net profit on letting your flat

PawelK

Hello.

Can someone help from their own experience as I think I may be missing something. I may consider moving out of my 2bed flat to live with my partner. Assuming my calculation are correct I would be just above breaking even!

Rental income 14,400
Allowable deductions
Service charge 1,100
Letting agent fees (assuming I go with them at 10%) 1,440
That leaves me with taxable profit of 11,860
This would be subject to 20% tax, leaving me with a profit of 9,488.
From this I need to deduct my mortgage repayments of around 9,600.

You can see that leaves me with no net profit or even a loss. Perhaps this would improve slightly if I can offset interest part of my repayments but I think that was recently scrapped.

Thank you

theartfullodger

Mortgage repayment? Only interest allowed.

Buy a book on property tax. It will save you money. There are more than 10 taxes a Landlord may pay - stop worrying about just income tax.

Heard about s24?

You seem to have forgotten a lot of likely expenses

Even loss needs reporting to HMRC

PawelK

Thanks but your post doesn't really answer my question. It looks more to me like you just wanted to make a comment on the website. I still appreciate your reply though.

I am hoping for someone to lay down the most likely calculation for someone like me and of needed I can provide extra details.

hazyjo

How does it not answer your question?! You have politely been told there's more to consider than just income tax. Are you implying someone with 10k+ posts just wanted to comment for the sake of it?

You were also asked a question. Nobody will be able to give you exact figures. We have no idea about your financial status, income, other interests, etc or what expenses you may incur on the property.

It's not an easy money route, especially as you have a mortgage on it - which they may insist is changed to a BTL one which will increase the interest even further.

G_M

PawelK wrote: »

....

Rental income 14,400 I bet you've based that on 12 months rent pa? Budget for 10 months
Allowable deductions
Service charge 1,100 if you say so
Letting agent fees (assuming I go with them at 10%) 1,440 Ah! so I was right! You will not get £14,400 in rent pa
That leaves me with taxable profit of 11,860 Why have you deducted the service charge and agent fees above, but mortgage below?
This would be subject to 20% tax, leaving me with a profit of 9,488.
From this I need to deduct my mortgage repayments of around 9,600. Repayment or interest only mortgage? What is the £9,600?


What about the other costs of letting - there are many!
What about the other allowable deductions? There are many!


You can see that leaves me with no net profit or even a loss. Perhaps this would improve slightly if I can offset interest part of my repayments but I think that was recently scrapped.

Thank you

I'm afraid your budgetting is so simplistic that it is not worth the paper it's writ......


Do a proper budget! Get a decent book. They are free at the library.


And /or read:
https://forums.moneysavingexpert.com/discussion/5180214/tenancies-in-eng-wales-guides-for-landlords-and-tenants

Crashy_Time

hazyjo wrote: »

How does it not answer your question?! You have politely been told there's more to consider than just income tax. Are you implying someone with 10k+ posts just wanted to comment for the sake of it?

You were also asked a question. Nobody will be able to give you exact figures. We have no idea about your financial status, income, other interests, etc or what expenses you may incur on the property.

It's not an easy money route, especially as you have a mortgage on it - which they may insist is changed to a BTL one which will increase the interest even further.

Fair assumption with that number of posts IMO.

Crashy_Time

PawelK wrote: »

Thanks but your post doesn't really answer my question. It looks more to me like you just wanted to make a comment on the website. I still appreciate your reply though.

I am hoping for someone to lay down the most likely calculation for someone like me and of needed I can provide extra details.

Basically some posters don`t seem to like landlords very much, which i find surprising given the general tone of buy buy buy Property is a winning bet etc. etc. Bottom line is that you know next to nothing about being a landlord and this is just going to be headache after headache for you IMO, especially now that the government are trying to act tough on landlords and the causes of landlords.

PawelK

Thanks all. Considering how more complex than I thought this is, can we just agree on something. It is possible to either have losses as well as profit from letting your flat?

00ec25

PawelK wrote: »

Thanks all. Considering how more complex than I thought this is, can we just agree on something. It is possible to either have losses as well as profit from letting your flat?

you are asking factual questions whose answers are simply a case of do your own reading or employ an accountant who already knows it.

You are not asking complex questions that need us to steer you towards the correct interpretation of the guidance.

do the course:
http://www.hmrc.gov.uk/courses/syob3/new_letting/HTML/new_letting_menu.html

do the reading:
https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income

https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

https://www.taxinsider.co.uk/property-tax-insider

http://www.ttrbarnes.com/rental-businesses-can-cant-claim/

the above are just a snippet of what is easily available online for the sake of a few moments using google

markin

Repayment or interest only mortgage?



If you can break even on a Repayment, And the property value is on the up over 10/20 years you may still make a profit in the end. Or you could end up in negative eq, but at least you would now own it, and make a profit on the next 20 years.

theartfullodger

PawelK wrote: »

Thanks all. Considering how more complex than I thought this is, can we just agree on something. It is possible to either have losses as well as profit from letting your flat?

FF.. ....It is possible to either have losses as well as profit from any bleedin' business......