Tax advice for letting my flat

83dons2

Grumpy_chap said:

Has the OP considered second property SDLT on new home as part of the calculation of whether retain existing flat as BTL is viable?

Hi yes in Scotland it is LLBT and will be about 1900 on a 240,000 property. The real thing to think about though is the additional ADS tax which comes out near £10k if you get a second property.

Dazed_and_C0nfused

You will be paying 41% tax on what HMRC view your profit to be (totally different to what you think your profit is)

You will be able to get a tax reduction for finance costs but they aren't an allowable expense, you get a set amount of relief which means your profit is greater than you would otherwise think.

You can claim either the property allowance or your expenses, not both.

Self Assessment is going to be the correct option looking at your figures.

sheramber

83dons2 said:

I think it is different in Scotland I'm on 9.5% I think but they are proposing increase. Also likely be a wage increase soon Consultation Document - NHS Member Contributions 2022.pdf (pensions.gov.scot). However this is not my main question.

1 I want to confirm that any future earnings from letting a property will be charged at higher rate in Scotland 41% (kick in at £43,663). My payroll contact has said last year 21/22 my taxable pay was £43,820.77 (gross pay minus super contributions - pension and NI maybe?). It sounds to me like I am already creeping into higher rate band so any future earning will be automatically at that rate is this correct? Not sure how this affected by claiming relief on mortgage interest payments as it says this can be offset vs tax? i think the first £1000 of any income ( i presume net income after deductions) is exempt (property allowance) from tax regardless is this correct? So I would in theory pay higher rate for any income earned over £1000? Seemingly if net income is between £1000-£2500 I dont ned to do a full self assessment and if over £2500 then its a full self assessment.

2 I want to detail a list of what is and what isn't deductible from tax from the letting income. From what I have read so far these seem deductible is this right?

Allowable deductions?:
Landlord insurance £25/month
Landlord management fees £65/month
Initial tenant setup fee with management company £300/per tenant
Gas certificate £72/year
Council registration £30/year
EICR & PAT testing £30/year
Legionella testing £30/year
Utility and council tax bills paid by me when flat has no tenant
Any repairs (not improvements)
Mortgage interest and mortgage arrangement fees (20% reduction on interest paid over the year. Not sure if this is the same in Scotland) ???

 i think the first £1000 of any income ( i presume net income after deductions) is exempt (property allowance) from tax regardless is this correct? 

No. It is £1000 instead of claiming any expenses


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