Renting out house and renting another: tax?

dutchcloggie

Hello,

I am sure this has been asked before so please point me to the right thread as I could only find a really old one.

I own a house in one part of the country. I have a new job elsewhere. I want to rent my house out for a year until I find a place to buy near my new job.  So I'll be renting a place for myself. 

Will the tax man still see the rent from the house I own as pure income? 

If my salary is, say £1,600 per month and my house rents out for £800, will the tax man really see that as me making £2,400 per month, eventhough I have to pay a mortgage and rent on the place where I live??

Surely not?

Slithery

dutchcloggie said:

Will the tax man still see the rent from the house I own as pure income?

Yes, minus any allowable expenses. The rent you pay isn't one of them.

dutchcloggie said:

Surely not?

Why not? You'd be starting a residential lettings business.

Please read the following thread and all of the links that it contains before taking this idea any further...
Tenancies in Eng/Wales: Guides for landlords and tenants

davidmcn

dutchcloggie said:
Surely not?

Where you live (and how much that costs you) doesn't make any difference to your income tax status as a landlord - but you're mistaken if you think you're taxed on the gross rent, it's only on your profit.

dutchcloggie

davidmcn said:

dutchcloggie said:
Surely not?

Where you live (and how much that costs you) doesn't make any difference to your income tax status as a landlord - but you're mistaken if you think you're taxed on the gross rent, it's only on your profit.

Sorry. I realise this. I just thought for sake of argument. Income is the rent minus agency fees and any maintenance, right? 

dutchcloggie

Slithery said:

dutchcloggie said:

Will the tax man still see the rent from the house I own as pure income?

Yes, minus any allowable expenses. The rent you pay isn't one of them.

dutchcloggie said:

Surely not?

Why not? You'd be starting a residential lettings business.

Please read the following thread and all of the links that it contains before taking this idea any further...
Tenancies in Eng/Wales: Guides for landlords and tenants

Hmmmm....

It just seems weird. Most people like myself are clearly not starting a business but just covering costs. In fact, I will lose money on this (which I am ok with as it keeps me on the property ladder) even without having to pay tax.  It seems wrong to punish people like me who are clearly not trying to make money from this kind of thing.  

davidmcn

dutchcloggie said:

Slithery said:

dutchcloggie said:

Will the tax man still see the rent from the house I own as pure income?

Yes, minus any allowable expenses. The rent you pay isn't one of them.

dutchcloggie said:

Surely not?

Why not? You'd be starting a residential lettings business.

Please read the following thread and all of the links that it contains before taking this idea any further...
Tenancies in Eng/Wales: Guides for landlords and tenants

Hmmmm....

It just seems weird. Most people like myself are clearly not starting a business but just covering costs. In fact, I will lose money on this (which I am ok with as it keeps me on the property ladder) even without having to pay tax.  It seems wrong to punish people like me who are clearly not trying to make money from this kind of thing.  

You're not being "punished", you're just paying tax.

dutchcloggie

I don't mind paying tax. Tax is a good thing that pays for many good things. However, I am not actually making any money by doing this.  It will take me into the £40,000 income when I am clearly not actually making any more money than I make now. I just wanted to clarify the tax position. 

It is what it is, I'll pay tax and lose the money.  I'll just have to tighten my belt.  The other option is to sell before I find a new place to buy, but stepping off the property ladder is apparently the worst thing one can ever do.

Claire2989

Why don’t you just sell your house and buy another one in your new area when you’re ready? 

You can’t just make your tenants leave when you want to. Much better idea to sell up and buy as a chain free buyer instead of starting a business (it will be a business no matter how you personally view it!) you don’t really have the interest in starting.

dutchcloggie

Claire2989 said:

Why don’t you just sell your house and buy another one in your new area when you’re ready? 

You can’t just make your tenants leave when you want to. Much better idea to sell up and buy as a chain free buyer instead of starting a business (it will be a business no matter how you personally view it!) you don’t really have the interest in starting.

Well, I have never lived in the area before. Only visited. I'm single, moving away from everyone I know and I have no idea about good or bad parts of the place I am moving to. Yes, I'm doing research, don't worry, but it seems more sensible not to buy right away and take my time in finding a nice area and then buy a house? Rather than buy a house and then find out I don't like the area? 

I would prefer to just sell my house and leavebleave everything behind, but everyone keeps telling me I shouldn't step off the property ladder at 44 and keep a foothold in case I don't like where I move to.

I am really struggling to know what's best and making these decisions on my own for the first time in many years is difficult. I thought I had it clear: rent my house out until I find a new place. But now it seems people say I should do the opposite.

Slithery

dutchcloggie said:

Most people like myself are clearly not starting a business but just covering costs.

You might not want to think like that, but legally that's exactly what you are doing.

I gave you a link to the very basics of becoming a LL earlier, there's several hours of research there that you really should read. Uneducated landlords are likely to make big mistakes that end up costing them a lot of money.

Claire2989

dutchcloggie said:

Claire2989 said:

Why don’t you just sell your house and buy another one in your new area when you’re ready? 

You can’t just make your tenants leave when you want to. Much better idea to sell up and buy as a chain free buyer instead of starting a business (it will be a business no matter how you personally view it!) you don’t really have the interest in starting.

Well, I have never lived in the area before. Only visited. I'm single, moving away from everyone I know and I have no idea about good or bad parts of the place I am moving to. Yes, I'm doing research, don't worry, but it seems more sensible not to buy right away and take my time in finding a nice area and then buy a house? Rather than buy a house and then find out I don't like the area? 

I would prefer to just sell my house and leavebleave everything behind, but everyone keeps telling me I shouldn't step off the property ladder at 44 and keep a foothold in case I don't like where I move to.

That’s why I was suggesting to buy when you’re ready (you suggested in a years time in your OP). I wasn’t suggesting blindly buying a house when you’re not sure.

Everybody might be suggesting it but they don’t need to take the responsibility and risk you will need to do. Letting is a long term investment. 

For example, in a years time what would happen if your tenant refuses to move (completely legal for them to do so) and you have to go down a costly court process to evict them (if you even can because you’ve done everything perfectly up to that point). You’re making a loss on your rental income minus expenses and tax. Then you get the property back and it’s trashed and you need to fork out a fair whack to get it back. In addition the predicted property slump has happened and your property isn’t worth what it was. All this to deal with while doing your regular job, living in rented when you just want to sell up and buy and not living in the area. I’m being worst case scenario but it’s a real risk. Is that what you want to deal with? 

Or would you prefer to sell rent for a bit then buy a suitable property when you know where you want to be. 

I’m usually supportive to wanna-be landlords looking to start a business but from what you’ve said that’s not you. You need to think of all the real risks and benefits and if that makes sense for your situation. Only you can make that decision.