Renting out house and renting another: tax?

AdrianC

dutchcloggie said:

But yes, I'd prefer to sell and be done with it if it wasn't presented as a stupid thing to do.

Who's "presenting" it as such?
What logic are they using?

Why is subsidising the customers of your business through your annual losses a better idea than not starting that business in the first place, if you don't even want to run the business?

dutchcloggie

csgohan4 said:

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.  

a business where it is losing money, is that viable??
you need to do a business case with potential yields, over heads, eviction costs, no rent coming through e.t.c

If I had the money now I wouldn't go into BTL, unless I was a millionaire and it was my full time job, otherwise S+S ISA e.t.c

But it wouldn't be a business venture for me. It would be a means to an end: a way to not step off the property ladder. So I would not mind if I end up incurring some costs, in exchange for the security of not stepping off the ladder. 
But I don't know which is the better risk to take: risks and hassle of renting the house out, or risk and hassle of selling and buying a new place a year later.

dutchcloggie

Norman_Castle said:

dutchcloggie said:

Slithery said:

dutchcloggie said:

But what about stepping off the property ladder with people saying that's a bad idea?

It's only a bad idea when house prices are rapidly rising, I can't see the market increasing much in the next year.

 I keep thinking it would actually be a good time to sell, rent for a bit and then buy something later. 

How much equity in your current property? With a large deposit another mortgage should be easily available. Being chain free as both a seller and buyer is simpler.

Instead of renting would being a lodger or a house share be cheaper?

I hope to have about £40,000 equity. 

tom9980

Sell now buy in a year is the best option in my opinion.

dutchcloggie

AdrianC said:

dutchcloggie said:

But yes, I'd prefer to sell and be done with it if it wasn't presented as a stupid thing to do.

Who's "presenting" it as such?
What logic are they using?

Why is subsidising the customers of your business through your annual losses a better idea than not starting that business in the first place, if you don't even want to run the business?

But it isn't a business venture to make money for me.  It is purely a way to not have to step off the property ladder. And I would be willing to accept that it might cost me some money in order to keep access to the property ladder. If it will cost me, say, £200 per month in extra money, just so that a year later, I can sell and buy a new house, that is worth it for me. 

It is not in any way about making money. It is all about keeping access. I would see it as an investment in keeping access, not specifically an investment to make money in the short term.

As a business venture, it makes no sense, I understand. But not everything is about making money. For me it is about peace of mind for the far future. And I just don't know what would give me more peace of mind in the long run. Basically: what is the best chance of buying a new house in 12 months: selling now and rent for a year until I have settled and found a new house to buy, or rent it out until I have settled and then sell it. 

And I guess only I can answer which would give me more peace of mind...

AdrianC

dutchcloggie said:

But it wouldn't be a business venture for me.

Yes, it would. Because it IS.

Whether you like to pretend it isn't or not, it really IS.

You'd only be fooling yourself that it isn't, so that you can give yourself that much-coveted title of "accidental landlord", and be in denial about the fact it's simply not a profitable one.

So I would not mind if I end up incurring some costs, in exchange for the security of not stepping off the ladder.

Let's just pause and investigate that. "Incurring some costs" = "Subsidising your customers, your tenants, accommodation choices." = Literally, you are paying them to live there.

They pay £1,200/month for accommodation that is costing you £1,400/month, so you are subsidising their accommodation by £200/month or £2,400/year. Plus the loss in investment opportunities for your equity elsewhere.

 Let's say that you run this business for five years. That's £12,000 that you've given to your tenants. How is that helping to make your own future accommodation choices easier and wider?

Now factor in the loss of flexibility. You decide the time is right to buy yourself a home, or you want to move back into the let property? You can't. Because you've still got tenants in there. You pay the +3% SDLT - sure, you might get it back eventually... You have to give notice (are they on a fixed-term?), maybe go to court for a possession hearing. Put the property into a saleable condition. Pay the mortgage, service charge, utilities while it's empty. And let's hope there's no voids or damages or bad debts to further drag your business into losses...

dutchcloggie

All of that is true. But, I am talking about a period of a year. Max. Time to find out if I can settle on the other side of the country, away from friends and family. And then decide to stay or return. I am not wanting a long term thing. 
I have zero intention on this being a long term thing. I don't want to be a landlord and don't plan to be one for more than a year. It is an investment in peace of mind. Not every decision has to be for profit. If I subsidise someone else for a short while but it gives me peace of mind in the long term,I'm ok with that. I am security driven,money driven. 
Many people like me do this for all kinds of reasons. I'm just trying to work out if it is something I can live with for a year. 

csgohan4

I don't think you fully grasp the business costs OP. There is no such thing as an accidental LL, you will be a LL which is a business and have to file tax returns

As Above, why would you run business at a loss? are you a charity. What little equity you build up will be eaten by these costs

A taste of things to come if your not careful
https://forums.moneysavingexpert.com/discussion/5983050/taking-tenant-to-small-claims-court

https://forums.moneysavingexpert.com/discussion/5896992/evicting-tenants-via-court-and-bailiffs

dutchcloggie

Thank you for all the advice. It just confirms what I feel: I prefer a clean break and just sell and be done with it. Too much worry and uncertainty in renting it out. I'm not very financially savvy so I don't want to make my life a constant worry. 

JGB1955

Where is there 'peace of mind' in being a landlord?  You say it would only be for one year - but that isn't your decision once you have tenants. The house would be THEIR home and it could take a good six months to evict them once you decide it's time to sell.  You won't be able to sell until they have gone.  What do your mortgage company think of your plan?  It's a crazy idea and would keep me awake at night.  No peace of mind from my perspective.