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Taxation rules for landlords?

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dippa
dippa Posts: 30 Forumite
in House buying, renting & selling
Just wondering, i'm looking to rent my flat out, which is paid for, to help pay for my mortgage for my house. Will this be taxed or can it be classed as none profit because it's being used to pay my other mortgage ?

I believe I know the answer but hoping it's different to my beliefs lol

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  • G_M
    G_M Posts: 51,977 Forumite
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    :rotfl::rotfl::rotfl::rotfl::rotfl::rotfl::rotfl:


    (sorry!)
  • dippa
    dippa Posts: 30 Forumite
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    Haha wishful thinking. Thanks for clearing this up for me
  • 00ec25
    00ec25 Posts: 9,123 Forumite
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    http://lmgtfy.com/?q=Taxation+rules+for+landlords
  • kinger101
    kinger101 Posts: 6,282 Forumite
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    If you pop in to your local tax office tomorrow, you can take the P155 form. Everything you need to know to offset the rent again the mortgage payments will be on there.
    "Real knowledge is to know the extent of one's ignorance" - Confucius
  • G_M
    G_M Posts: 51,977 Forumite
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    There's a tax office....?
  • tealady
    tealady Posts: 3,742 Forumite
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    kinger101 wrote: »
    If you pop in to your local tax office tomorrow, you can take the P155 form. Everything you need to know to offset the rent again the mortgage payments will be on there.

    LOL
    :T :rotfl: :rotfl: :rotfl:
    Find out who you are and do that on purpose (thanks to Owain Wyn Jones quoting Dolly Parton)
  • silvercar
    silvercar Posts: 46,960 Ambassador
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    He who laughs last...


    If you took out the mortgage on your house in order to keep the flat as a rental business (as opposed to selling the flat to take a smaller mortgage on your home), then the mortgage is a legitimate allowable expense of your rental business.

    You would need to be able to demonstrate, by the timings, that this was the purpose of the loan. There is no obligation for the mortgage to be secured on the rental property (or indeed anywhere).

    You can only claim the interest, not capital repayment and the amount is restricted to the value of the rental property when first let. There are also restrictions on the tax benefit of this that primarily effects higher tax payers.
    I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, mortgages and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • kinger101
    kinger101 Posts: 6,282 Forumite
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    silvercar wrote: »
    He who laughs last...


    If you took out the mortgage on your house in order to keep the flat as a rental business (as opposed to selling the flat to take a smaller mortgage on your home), then the mortgage is a legitimate allowable expense of your rental business.

    You would need to be able to demonstrate, by the timings, that this was the purpose of the loan. There is no obligation for the mortgage to be secured on the rental property (or indeed anywhere).

    You can only claim the interest, not capital repayment and the amount is restricted to the value of the rental property when first let. There are also restrictions on the tax benefit of this that primarily effects higher tax payers.

    HMRC have recently been applying the wholly and exclusively test.

    https://www.accountingweb.co.uk/tax/hmrc-policy/hmrc-altered-guidance-to-deny-interest-relief

    OP should probably seek professional advice if they want to follow that path.
    "Real knowledge is to know the extent of one's ignorance" - Confucius
  • silvercar
    silvercar Posts: 46,960 Ambassador
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    kinger101 wrote: »
    HMRC have recently been applying the wholly and exclusively test.

    https://www.accountingweb.co.uk/tax/hmrc-policy/hmrc-altered-guidance-to-deny-interest-relief

    OP should probably seek professional advice if they want to follow that path.

    That example is different, in that the client was extracting money from the business at a later point. Here we are talking about the business funding structure at the start.
    I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, mortgages and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • kinger101
    kinger101 Posts: 6,282 Forumite
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    silvercar wrote: »
    That example is different, in that the client was extracting money from the business at a later point. Here we are talking about the business funding structure at the start.

    HMRC still might argue that a loan isn't wholly and exclusively for business purposes if the facts suggest it's taken out to purchase a residential property. The facts are very similar in that the inspector has argued the loan wasn't for the purpose of the letting business, but the purchase of a residential home.

    It seems HMRC are now ignoring their own manuals, and the taxpayer might not have a reasonable expectation that they can rely on them.

    https://www.taxation.co.uk/Articles/2017/10/17/337104/interest-relief-capital-withdrawn-business
    "Real knowledge is to know the extent of one's ignorance" - Confucius
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