PLEASE READ BEFORE POSTING

Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.

Tax from renting when most of rent goes into paying off mortgage

Options
24567

Comments

  • Slithery
    Slithery Posts: 6,046 Forumite
    First Anniversary Name Dropper First Post Photogenic
    Options
    lesterxburnham wrote: »
    So, between September 2017 - March 2018 I will get £3710 from rent and I will pay £3640 mortgage on that property. My Questions is, will I pay tax off £3710 or £70 (£3710 - £3640)?

    Neither.

    Only the interest part of the mortgage is deductible.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Name Dropper Photogenic First Anniversary First Post
    Options
    Consult an accountant. After the initial briefing you'll be able to take care of matters yourself. The accountants fees are tax deductible. So worth the investment.
  • Cakeguts
    Cakeguts Posts: 7,627 Forumite
    First Anniversary Name Dropper First Post
    Options
    lesterxburnham wrote: »
    ok, thanks for all the replies, I do appreciate your help. yes, I was reckless when setting the rent as I didn't consider tax implications. So, if I lose money in this tenancy period then be it but I want to learn from my mistakes and know how much to charge next tenants.

    You really didn't do any research before you did this did you? You cannot charge tenants however much you want. You can only charge them what your property will let for. If you charge more than your flat is worth on the rental market you won't get a tenant and it will remain vacant meaning that you will make an even bigger loss than you do now.

    No one is going to pay more for your property if they can get one the same or similar for less.

    From what you have said so far it looks as if your property is always going to make a loss as a rental so in order to stop this loss you only have one option and that is to sell it.
  • 00ec25
    00ec25 Posts: 9,123 Forumite
    Combo Breaker First Post
    edited 30 November 2017 at 11:27PM
    Options
    ProDave wrote: »
    You are still "self employed" so need to register with hmrc and submit a tax return.

    If your self employed business makes a loss, that may reduce the tax bill for any other income you have.
    no you are not "self employed"

    letting property is not a trading activity, it is an "investment" activity which has a category all of its own: income from letting

    a loss from letting activity is expressly not treated the same way as self employed losses in respect of offsetting against other taxable income
  • Typhoon2000
    Typhoon2000 Posts: 1,122 Forumite
    First Anniversary First Post Combo Breaker
    Options
    If that's a repayment mortgage you have, then I don't think you will be making any money every month after paying tax. You should not look to this as a bussiness producing a positive income every month. Rather you should look at is as some one contributing to pay off your mortgage rather you having to shoulder the full burden.
    If you are new to this you may want to go for a fully managed service from a letting agent. They may take 10% of you rent but that is tax deductible so effectively 6% in your case.
  • 00ec25
    00ec25 Posts: 9,123 Forumite
    Combo Breaker First Post
    edited 1 December 2017 at 12:38AM
    Options
    lesterxburnham wrote: »
    So, between September 2017 - March 2018 I will get £3710 from rent and I will pay £3640 mortgage on that property. My Questions is, will I pay tax off £3710 or £70 (£3710 - £3640)?
    as you have consent to let we can safely assume you have a repayment mortgage not an interest only mortgage. Therefore the "mortgage" has 2 components: a capital repayment element and an interest element. Only the interest element enters your tax calculation, and as linked in a previous post, for this and 3 more tax years there are transitional rules about how the calculation is done - read: https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

    does the property have any gas appliances? You have not mentioned the cost of the annual gas safety certificate (criminal offence not to have one if you need it)
    lesterxburnham wrote: »
    Replies above are conflicting about insurance contributions - do I need to pay insurance contributions or not?
    possibly because you have not said what "insurance"
    - National Insurance? - No, you do not pay NI on rental profits
    - Landlord's Buildings insurance? - you be a fool not to have it (tax deductible expense)
    - Landlord Contents insurance? - maybe? your choice based on your risk appetite (tax deductible expense)
    - Rent Guarantee insurance? - maybe? your choice based on your risk appetite (tax deductible expense)

    given your lack of research (effort?) to date, here are some further links you will need to know inside out:
    http://www.hmrc.gov.uk/courses/syob3/new_letting/HTML/new_letting_menu.html

    https://www.youtube.com/watch?v=4YmcrAwptdQ&index=17&list=PL8EcnheDt1ziQSjJNRITtCf7XD_ne-_lQ&utm_source=HMRC-DSBA-Dec-3b&utm_campaign=DSBA-Campaign&utm_medium=Email

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

    and ultimately if you do not wish to employ a professional accountant who will get it right for you, you need to know everything:
    https://www.gov.uk/hmrc-internal-manuals/property-income-manual
    lesterxburnham wrote: »
    Also, if that makes any difference, I live in Scotland and I'm in full time employment where I'm on 40% tax bracket. How does it affect my HMRC obligations?
    ask Nicola, she wants to be independent, so let her educate her people.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Name Dropper Photogenic First Anniversary First Post
    Options
    Typhoon2000 wrote: »
    If that's a repayment mortgage you have, then I don't think you will be making any money every month after paying tax.

    Profit and cash are two different matters. Letting after tax may well generate a profit. However this may not be enough to cover the capital element of the mortgage repayment. Hence a cashflow issue.
  • Pixie5740
    Pixie5740 Posts: 14,515 Forumite
    Name Dropper First Post Photogenic First Anniversary
    Options
    00ec25 wrote: »
    ask Nicola, she wants to be independent so let her educate her people.

    For those of us in Scotland who are higher and additional rate tax payers we will be caught in a !!!! sandwich of the Tories in power at Westminster and the SNP in Holyrood. Austerity cuts from one party and higher taxes from the other.

    I digress. OP, are you aware that the next tenants you get in with have one of the new Private Rental Tenancies which come into force tomorrow?
  • G_M
    G_M Posts: 51,977 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    Options
    Please note that all the links I provided in post 7 are written from an Englandd/Wales perspective.

    You are aware I hope that in Scotland all landlords must be registered with the council?
  • [Deleted User]
    [Deleted User] Posts: 7,323 Forumite
    Name Dropper First Post First Anniversary
    edited 30 November 2017 at 11:54PM
    Options
    Re Private Rental Tenancies to be used from tomorrow in Scotland

    https://beta.gov.scot/policies/private-renting/private-tenancy-reform/

    Sounds a big improvement on TA's in England. I like the ability of councis to apply to make an area a pressure zone so rental values can be capped (if accepted). But it might make repossession a bit easier for LL's too (haven't read in detail).
This discussion has been closed.
★ ★ ★ Meet your Ambassadors

Categories

  • All Categories
  • 343.2K Banking & Borrowing
  • 250.1K Reduce Debt & Boost Income
  • 449.7K Spending & Discounts
  • 235.3K Work, Benefits & Business
  • 608.1K Mortgages, Homes & Bills
  • 173.1K Life & Family
  • 247.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards