Converting a Flat to Buy To Let

jamesdevonport

Hi everyone,

I'm currently looking to let out my flat and move to a new property and am a bit stuck on something.

I've been doing the sums on letting the property out and the tax implications. 

Given the property is under my own name it appears I would have to pay 40% on all rental income, which would leave me with less than the mortgage repayments and make the whole thing unviable.

Does anyone have any suggestions of things I could look into to make it more tax efficient.  I don't want to make any profit renting it out, just to have enough from rent to cover the mortgage!

Thanks, James.

MEM62

BTL's are not tax efficient.  You can also expect future legislation to be more onerous and less landlord friendly.  That is why mine will be up for sale soon.  

Slithery

Why do you want to start a business that will make you a loss?
Have you factored in the additional 3% stamp duty that will be due on your new purchase (if you are buying).

Gycraig

Will the 40 percent take it under the monthly cost for a btl mortgage or your current mortgage?. 

jamesdevonport

Unfortunately, my building has been affected by the cladding scandal which means I'm unable to sell it for several years which is why I have been looking at other options.

I estimate it would get around £1200 a month in rent and the mortgage is about £900, so the huge tax burden seems to make it impossible to let out meaning I am totally stuck here indefinitely.  Trying to think of any way to make it work!

hazyjo

Could try to sell in a traditional auction?

Mutton_Geoff

jamesdevonport said:

I estimate it would get around £1200 a month in rent and the mortgage is about £900, so the huge tax burden seems to make it impossible to let out meaning I am totally stuck here indefinitely.  Trying to think of any way to make it work!

You don't pay 40% on your rental income, there are allowable business expenses you can deduct. Presumably your £900 mortgage payment is against a repayment mortgage and is not the interest alone? Anything above the interest owed is reducing your outstanding debt so cannot be used as a valid figure to formulate a business plan for a BTL.

Even professional landlords are exiting the business, it is likely a very bad time for accidental (read inexperienced) landlords to start.