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  • FIRST POST
    • Star_Gazer
    • By Star_Gazer 13th Jan 19, 6:02 PM
    • 4Posts
    • 0Thanks
    Star_Gazer
    Accidental Landlord: help pleaseHi
    • #1
    • 13th Jan 19, 6:02 PM
    Accidental Landlord: help pleaseHi 13th Jan 19 at 6:02 PM
    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,
Page 1
    • pramsay13
    • By pramsay13 13th Jan 19, 6:14 PM
    • 693 Posts
    • 1,109 Thanks
    pramsay13
    • #2
    • 13th Jan 19, 6:14 PM
    • #2
    • 13th Jan 19, 6:14 PM
    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
    • By Pixie5740 13th Jan 19, 6:22 PM
    • 13,751 Posts
    • 19,865 Thanks
    Pixie5740
    • #3
    • 13th Jan 19, 6:22 PM
    • #3
    • 13th Jan 19, 6:22 PM
    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,
    Originally posted by Star_Gazer
    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
    • By Star_Gazer 13th Jan 19, 6:30 PM
    • 4 Posts
    • 0 Thanks
    Star_Gazer
    • #4
    • 13th Jan 19, 6:30 PM
    • #4
    • 13th Jan 19, 6:30 PM
    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
    • By chanz4 13th Jan 19, 6:32 PM
    • 10,010 Posts
    • 2,979 Thanks
    chanz4
    • #5
    • 13th Jan 19, 6:32 PM
    • #5
    • 13th Jan 19, 6:32 PM
    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
    • By Star_Gazer 13th Jan 19, 7:12 PM
    • 4 Posts
    • 0 Thanks
    Star_Gazer
    • #6
    • 13th Jan 19, 7:12 PM
    • #6
    • 13th Jan 19, 7:12 PM
    Not sure what you mean by this!
    • Marvel1
    • By Marvel1 13th Jan 19, 7:18 PM
    • 3,982 Posts
    • 4,398 Thanks
    Marvel1
    • #7
    • 13th Jan 19, 7:18 PM
    • #7
    • 13th Jan 19, 7:18 PM
    Thanks for the response, I have that element covered as it's via a high street agent.
    Originally posted by Star_Gazer
    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
    • By anselld 13th Jan 19, 7:22 PM
    • 6,183 Posts
    • 5,966 Thanks
    anselld
    • #8
    • 13th Jan 19, 7:22 PM
    • #8
    • 13th Jan 19, 7:22 PM
    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!
    Originally posted by Star_Gazer
    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
    • By Star_Gazer 13th Jan 19, 8:09 PM
    • 4 Posts
    • 0 Thanks
    Star_Gazer
    • #9
    • 13th Jan 19, 8:09 PM
    • #9
    • 13th Jan 19, 8:09 PM
    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
    • By LateStarter 13th Jan 19, 8:28 PM
    • 218 Posts
    • 240 Thanks
    LateStarter
    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
    • By ThePants999 13th Jan 19, 8:40 PM
    • 1,480 Posts
    • 1,915 Thanks
    ThePants999
    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
    Originally posted by Star_Gazer
    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.
    • G_M
    • By G_M 13th Jan 19, 8:43 PM
    • 47,453 Posts
    • 57,950 Thanks
    G_M
    You need to get a much better understanding of how the tax system works.

    You also need a much better understanding of how finance generally of a BTL works.

    I suspect you also need a much better understanding of how rental regulations and leglislation apply to you.

    Read my sticky thread at the top. Then click on all the links within it and read all that as well.

    Go to the library and borrow (free) a book on property invetment and/or how to let a property or similar.

    You may be an 'accidental' landlord, but the law applies to you as much as to a 'professional' landlord.

    And your tenants have the right to expect the same level of professional treatment from you as from any other landlord.

    Finally - do not believe you can delegate your responsibilities to an agent. A (good) agent can help, can advise, can take some of the administrative burden, but ultimately you are the landlord and the buck stops with you.
    • Rosemary7391
    • By Rosemary7391 13th Jan 19, 8:48 PM
    • 2,727 Posts
    • 4,725 Thanks
    Rosemary7391
    I really second the recommendation that you look through G_M's sticky post. They explain things very well, and even if you leave the day to day management to an agent, you need to know what questions to ask to make sure everything is being done properly.



    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!
    Originally posted by Star_Gazer

    Your calculation is incorrect because the mortgage repayment includes both interest (a cost) and capital repayment (more like moving money around - it's still there, available to you whenever you decide to sell the property assuming you sell for the same price you bought it at).
    Slinkies 2018 Challenge - 0/80lb lost
    • Crashy Time
    • By Crashy Time 13th Jan 19, 9:24 PM
    • 7,568 Posts
    • 2,767 Thanks
    Crashy Time
    I really second the recommendation that you look through G_M's sticky post. They explain things very well, and even if you leave the day to day management to an agent, you need to know what questions to ask to make sure everything is being done properly.






    Your calculation is incorrect because the mortgage repayment includes both interest (a cost) and capital repayment (more like moving money around - it's still there, available to you whenever you decide to sell the property assuming you sell for the same price you bought it at).
    Originally posted by Rosemary7391

    Big assumption, not very smart at the moment IMO.
    • wesleyad
    • By wesleyad 14th Jan 19, 10:29 AM
    • 446 Posts
    • 417 Thanks
    wesleyad
    Big assumption, not very smart at the moment IMO.
    Originally posted by Crashy Time
    Well even if you assume the worst (not that you would), the capital repayment is still there and would help reduce any negative equity. So it's still not lost money.
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