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

dean350

For higher rate taxpayers these days you are far better in the long term upping your pension contributions than investing in BTL. You can put up to 60K a year in and get full tax relief

_Penny_Dreadful

The capital repayment of a mortgage has never been an expense you can use to offset tax. Being that it is not an expense. Yes, as a higher rate tax payer the treatment of the interest on the mortgage is less good than it was a few years ago but I think you would still have been disappointed with how much ended up in your pocket.

My advice, if you are moving to a new area and intend to buy in the new area in the near future is to sell the current property and bank the capital until you're ready to buy again.  It means when you find somewhere you like you can move quickly instead of going through the process of evicting someone from their home and trying to match up selling and buying dates, or ending up with an overlap that leaves you temporarily paying a higher rate of SDLT/LBTT/LTT. You'll probably beat the rental yield on letting your property just be  sticking the proceeds of the sale into a cash ISA or fixed term bond neither of which will phone you at the weekend to tell you the boiler has packed in.

IAMIAM

Thanks for the replies. It does seem feasible to maybe sell, bank the equity and then rent for 6-12 months max whilst property hunting with an urgency to not leave the housing ladder for longer than that.

How does tax work on a savings amount? If I bank say 75k at 6% for a year or two! Is the tax auto deducted by the bank? So the 4.5k annually I would get on this amount would actually be.....

MEM62

IAMIAM said:

How does tax work on a savings amount? If I bank say 75k at 6% for a year or two! Is the tax auto deducted by the bank? So the 4.5k annually I would get on this amount would actually be.....

You'll want to put £20K of that into a cash ISA to keep it away from the tax man.  Any interest earned on the remaining £55K will be reported to the tax man by the bank / institution holding the money.  HMRC will collect it by adjusting your tax code or you could arrange to make a single payment.     

IAMIAM

MEM62 said:

IAMIAM said:

How does tax work on a savings amount? If I bank say 75k at 6% for a year or two! Is the tax auto deducted by the bank? So the 4.5k annually I would get on this amount would actually be.....

You'll want to put £20K of that into a cash ISA to keep it away from the tax man.  Any interest earned on the remaining £55K will be reported to the tax man by the bank / institution holding the money.  HMRC will collect it by adjusting your tax code or you could arrange to make a single payment.     

Thanks. It's the nervousness of selling my first home and coming off the property ladder for 6-12 months. I always think the worst, job loss or lack of funds for a new property or even a salary cut so I can't afford anything in that time off the ladder!!! 

caprikid1

I'll be honest when it comes to property  I always believe go short or long but never exit. That said in your case I suspect you have no realistic option than to sell and buy in the new location.

Sg28

caprikid1 said:

I'll be honest when it comes to property  I always believe go short or long but never exit. That said in your case I suspect you have no realistic option than to sell and buy in the new location.

How do you "go short" on property without selling?