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Accidental Landlord: help pleaseHi

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Star_Gazer
Star_Gazer Posts: 15 Forumite
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in House buying, renting & selling
Hello all,

Hopefully someone can help me out, as a result from a split i've now got a property which i'm letting out.

My question is in regards to getting the tax right... i'm confused by rules & regs so hoping someone can clarify my position below.

If I let my property at £1,100 per month - and my mortgage is £800 (repayment) how much of the mortgage can be deducted?

EG: Will I pay tax on the £1,100 or £300 remaining once mortgage deducted?

Thanks in advance,
«1

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  • pramsay13
    pramsay13 Posts: 1,951 Forumite
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    I think you have a lot of research to do as being a landlord is full of responsibilities, not just for getting the tax right.
    You cannot claim the repayment part of the mortgage as an expense, you can claim the interest part of it although the rules have changed this year so the amount you can claim varies.
  • Pixie5740
    Pixie5740 Posts: 14,515 Forumite
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    Star_Gazer wrote: »
    Hello all,

    Hopefully someone can help me out, as a result from a split i've now got a property which i'm letting out.

    My question is in regards to getting the tax right... i'm confused by rules & regs so hoping someone can clarify my position below.

    If I let my property at £1,100 per month - and my mortgage is £800 (repayment) how much of the mortgage can be deducted?

    EG: Will I pay tax on the £1,100 or £300 remaining once mortgage deducted?

    Thanks in advance,

    Accidental landlord. Get your tin hat on!

    You can't claim relief on the capital payment of your mortgage. How much relief you can claim on the interest portion depends....

    https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords

    https://www.propertygeek.net/article/mortgage-interest-relief/
  • Star_Gazer
    Star_Gazer Posts: 15 Forumite
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    Thanks for the response, I have that element covered as it's via a high street agent.

    So on that basis my tax (20%) will effectively be on the full mortgage (2.7% interest) which equates to £2,640 ... I can see why people don't want BTL anymore because this is costing me money each month based on this!
  • chanz4
    chanz4 Posts: 10,894 Forumite
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    Yup and even great fees from your letting agents
    Don't put your trust into an Experian score - it is not a number any bank will ever use & it is generally a waste of money to purchase it. They are also selling you insurance you dont need.
  • Star_Gazer
    Star_Gazer Posts: 15 Forumite
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    Not sure what you mean by this!
  • Marvel1
    Marvel1 Posts: 7,172 Forumite
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    Star_Gazer wrote: »
    Thanks for the response, I have that element covered as it's via a high street agent.

    Means nothing, the responsibility still lies with you e.g. deposit not protected, it won't be the letting agent being claimed 1x - 3x the penalty it will be yourself.

    Start here being in the landlord business:
    https://forums.moneysavingexpert.com/showthread.php?t=5180214
  • anselld
    anselld Posts: 8,281 Forumite
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    Star_Gazer wrote: »
    Thanks for the response, I have that element covered as it's via a high street agent.

    So on that basis my tax (20%) will effectively be on the full mortgage (2.7% interest) which equates to £2,640 ... I can see why people don't want BTL anymore because this is costing me money each month based on this!

    Repaying capital is not a cost. So it cannot be costing you money.

    If you are letting at 1100 per month and interest is 2640 then for example ...

    Income £13200
    Finance cost £2640
    Agents fees eg £1320

    Profit £9240
    Tax £1848

    ... assuming you remain a 20% taxpayer. There will be other deductible costs, eg insurance, maintenance, etc.

    You are a long way from it "costing you money".
  • Star_Gazer
    Star_Gazer Posts: 15 Forumite
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    My calculations:

    Income of £11,990.40 (after agents fee) which would be taxed at £4,796.16 on 40% then minus mortgage of £8,705.28 = £1,511.04 DEFICIT

    On top of this I have receipts totalling £1,500 (painting / skips / boiler service / repair work)

    Please correct me on the above, as I said before I am lost with this...but it seems I set me make a loss!
  • LateStarter
    LateStarter Posts: 327 Forumite
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    I think you're coming at this from the wrong angle; you have a property with a mortgage on it - if you intend to keep the property then you need to pay this mortgage. You do NOT have a debt-free property, where you can take the rent as your own income.


    You've fallen into the trap of thinking that property rental is somehow easy money; hopefully this thread will open your eyes a bit. Your really need to understand how it works, and if it's suitable for you (ans most likely it's not).
  • ThePants999
    ThePants999 Posts: 1,748 Forumite
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    Star_Gazer wrote: »
    Income of £11,990.40 (after agents fee) which would be taxed at £4,796.16 on 40% then minus mortgage of £8,705.28 = £1,511.04 DEFICIT
    If your mortgage is £8,700 a year, of which £2,640 is interest, then the remaining £6,060 isn't a cost to you, it's a capital transfer. You're changing £8,700 in cash into £6,060 in equity, so you're only losing £2,640.
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