Options with Rental

fatboydaz

Hi All,

Can I please check if my figures are correct and if there are any other ways I can cut Tax. I have recently changed jobs from a salary of £36,000 to £50,000 

My wife and I have a BTL with a monthly rental income of £1300.
The property currently monthly cost is £800, which includes mortgage, insurance, service charge, etc.

My yearly income is now £50,000 and my wife £32,200

For tax purposes does that mean we both need to declare £7,800 each as additional income? 

If that is the case it would in total our Tax bill would be an additional £4,026 a year?

If so we have divided that 12 Months = £335.50 + £800 (Running costs) = £1135.50 meaning the house is making a profit of £164 a month. 

Phoenix72

What are your allowable expenses excluding mortgage payments?

If these are more than £2,000 you would be best claiming that rather than the £1000 each allowance. You may also be able to deduct basic rate relief on mortgage interest (not capital repayments).

TBH, sounds like you need an accountant to help you get it right.

[Deleted User]

Phoenix72 said:

What are your allowable expenses excluding mortgage payments?

If these are more than £2,000 you would be best claiming that rather than the £1000 each allowance. You may also be able to deduct basic rate relief on mortgage interest (not capital repayments).

TBH, sounds like you need an accountant to help you get it right.

Agree with the final point as there is a profound lack of knowledge, not least the fact that mortgage interest is no longer an allowable expense against rental income but given as a basic rate tax credit. 

There is also some scope for allocating the share of profits differently from the normal 50:50 given that the higher earner will pay the vast majority of the rental profit at 40% rate. 

Jeremy535897

[Deleted User] said:

Phoenix72 said:

What are your allowable expenses excluding mortgage payments?

If these are more than £2,000 you would be best claiming that rather than the £1000 each allowance. You may also be able to deduct basic rate relief on mortgage interest (not capital repayments).

TBH, sounds like you need an accountant to help you get it right.

Agree with the final point as there is a profound lack of knowledge, not least the fact that mortgage interest is no longer an allowable expense against rental income but given as a basic rate tax credit. 

There is also some scope for allocating the share of profits differently from the normal 50:50 given that the higher earner will pay the vast majority of the rental profit at 40% rate. 

In a husband and wife case owning one property, it is not realistic to split the profit other than 50:50, unless the property is owned otherwise than 50:50 and a Form 17 has been filed.