How much income tax would I be paying on £950 per month rental income?

IAMIAM

If my PAYE is £55k, mortgage payment £825 and 9% management fee to estate agent.

El_Torro

You are a 40% tax payer, so you would pay 40% tax on any profit you make. There are various costs in maintaining your BTL property that can be used to reduce the amount of profit you make (and therefore how much tax you pay)

Your mortgage payments do not count as a cost for reducing your profit. However you can claim tax relief on any interest on the mortgage (capital payments do not qualify for tax relief). You will only get 20% tax relief on this, even though you are a 40% tax payer.

IAMIAM

I have just used this website link and cannot believe where the profit actually now comes from when renting your property out!!

I am effectively going to be paying half the mortgage myself as I would end up paying nearly half of my rental income to the taxman!!! 

Is this why everyone (ie BTL landlords are selling up!)

https://taxscouts.com/calculator/rental-income-tax/

propertyrental

Recent changes in tax law are certainly giving many LLs 2nd thoughts, and yes, some are selling up.

housebuyer143

With interest rates so high for savings and mortgages and property prices declining, it is less attractive to do a BTL at the moment.

El_Torro

A mortgage of £825 a month with rental income of £950 per month before letting agent fees isn't great. You might struggle to remortgage the property when the time comes. I assume this is a repayment mortgage, not interest only? If you want to keep renting the property out it may be necessary to switch to interest only to make the sums add up.

IAMIAM

propertyrental said:

Recent changes in tax law are certainly giving many LLs 2nd thoughts, and yes, some are selling up.

This is not what I thought was going to happen. I was hoping to put my property on rent and go and rent somewhere else myself for 6-12 months before deciding where to buy again (£50k Deposit).

But its looking like my income and rental income combined will mean I will end up paying for a my new house/rental mortgage and half of the mortgage on my owned rental property?!?!

IAMIAM

El_Torro said:

A mortgage of £825 a month with rental income of £950 per month before letting agent fees isn't great. You might struggle to remortgage the property when the time comes. I assume this is a repayment mortgage, not interest only? If you want to keep renting the property out it may be necessary to switch to interest only to make the sums add up.

Correct. It's a repayment mortgage with HSBC. Was hoping consent to let for a year or two. Then switch to BTL and buy a new property for myself. I had planned to do it last year but was hoping to do it over next 12 months. But looks like with my figures it won't work because of my income etc.

IAMIAM

propertyrental said:

Recent changes in tax law are certainly giving many LLs 2nd thoughts, and yes, some are selling up.

So at what point does it become worth while for me and others!!

Mstty

IAMIAM said:

I have just used this website link and cannot believe where the profit actually now comes from when renting your property out!!

I am effectively going to be paying half the mortgage myself as I would end up paying nearly half of my rental income to the taxman!!! 

Is this why everyone (ie BTL landlords are selling up!)

https://taxscouts.com/calculator/rental-income-tax/

When you say everyone well no because a lot of landlords are not leveraged with debt or small amounts.

IAMIAM

@Mstty but even if it were mortgage free and you earned £55k, in theory you would be paying largely the same amount of tax....