WWYD first time landlord or sell up?

elbii1

WWYD

I have a flat, recently valued at 285k, a neighbouring flat just launched at 270k. I bought for 265k three years ago. Rental income is estimated at £1450/month. 

I have a baby and my partner has a 2hr commute so we'd like to move.

I had planned to sell but the lower priced neighbouring flat has really put me off plus there's £8000 to pay on terms of service charge/planned building work.

I earn over £80k incl bonus so had been advised that I'd pay half of any rental profit in tax.

I'm really stuck. I'm now reluctant to sell so should I rent a cheaper house? Is there anything that can be done to avoid paying 40%+ tax on rental income?

Thabks for any advice 

theartfullodger

Wait till budget on 30th to see how tax rules change (or not).  Only a week.

Brie

there may be a very good reason the other flat is cheaper than your recent valuation.  condition?  rooms?  need to sell urgently?  

Albermarle

You could contribute a large amount to your pension each year to get you down into the 20% tax band.

RHemmings

Albermarle said:

You could contribute a large amount to your pension each year to get you down into the 20% tax band.

Do you have a link to somewhere that would explain how that works? 

NervyBuyer

Sell - price it to take into account the planned service charge and get rid of the all the hassle. Put it on now and you might just get it completed before the stamp duty nil rate threshold changes in April. (6% yield, really?)

elbii1

NervyBuyer said:

Sell - price it to take into account the planned service charge and get rid of the all the hassle. Put it on now and you might just get it completed before the stamp duty nil rate threshold changes in April. (6% yield, really?)

What does 6% yield refer to? 

Bookworm105

elbii1 said:

NervyBuyer said:

Sell - price it to take into account the planned service charge and get rid of the all the hassle. Put it on now and you might just get it completed before the stamp duty nil rate threshold changes in April. (6% yield, really?)

What does 6% yield refer to? 

it is the rental yield - which is how you evaluate whether keeping money tied up in a property is a "good" investment 

1,450 monthly x 12 = £17,400 per year gross income 

17,400 / 285,000 "value" = 6% yield 

In simple terms, if you had 285,000 in cash where could you invest it to get better than a 6% rate of return.
You use the value because that is how much is "invested" in the property because that is the size of the cash lump sum you would get when you sell it.

It is the most basic of measures used when looking at BTL as an investment. Obviously it ignores the fact you may have an o/s loan to repay from that 285k cash, hence there are of course many other more sophisticated ways of comparing investment performance, but rental yield is always the start point.