Renting out a flat - help with numbers please!
Discussion
So, if I rent out my flat (I only have one ie not a multiple landlord) for £1000 a month, and the interest-only mortgage is currently £400 a month, how do I reduce the profit as landlords everywhere seem to, in order to pay no tax? Buy stuff for the flat ie new kitchen every 5 mins or what? If the choice was spend £1500 quid a year on tax (on the profit) or £1500 a year on stuff for the flat, obviously I'd rather spend it on the flat. But is there somekind of calulator available to work out for 'x' amount of profit you should spend 'y' amount on the flat in order to make the tax bill nill?
I have a regular full time job but I'm in the 20% tax bracket, but if I included my 'profit' ie £600*12 I would tip into the 40% tax bracket.
I live with my wife in another property which is mortgaged. As you may have gathered from the above I have never done elf-assesment or anything.
Also, as I can make penalty-free overpayments on the interest only mortgage, would that be deductible or not? I'm presuming not. Thanks for any help or links to idiot-proof informations that spells it out. I do not intend to sell the flat for a long time.
I have a regular full time job but I'm in the 20% tax bracket, but if I included my 'profit' ie £600*12 I would tip into the 40% tax bracket.
I live with my wife in another property which is mortgaged. As you may have gathered from the above I have never done elf-assesment or anything.
Also, as I can make penalty-free overpayments on the interest only mortgage, would that be deductible or not? I'm presuming not. Thanks for any help or links to idiot-proof informations that spells it out. I do not intend to sell the flat for a long time.
Read the HMRC rules for whats allowable. 10% wear and tear if its furnished, insurance, gas saftey cert, accountants fees etc...
You can reduce it but there will always be some tax to pay otherwise why would you do it? thats what the tax man will be thinking if your tax return comes back every year as you manking a loss from £1000 pcm rent!
You can reduce it but there will always be some tax to pay otherwise why would you do it? thats what the tax man will be thinking if your tax return comes back every year as you manking a loss from £1000 pcm rent!
If you received property income in the tax year ended 5th April 2013, you had until 5th October to register yourself (and your wife if jointly held) for self-assessment otherwise you may be fined.
Have you done this?
There are also a number of costs beside mortgage interest that can be deducted for tax purposes.
David
David
Have you done this?
There are also a number of costs beside mortgage interest that can be deducted for tax purposes.
David
David
yeah I'm trying to work how to be a nom-dom like billionaire tory michael ashcroft
http://www.channel4.com/news/articles/politics/dom...
http://www.channel4.com/news/articles/politics/dom...
You can only reduce the profit by any legitimate expenses maintaining the property. Capital expenditure (improvements) can only be offset against the capital gains. You can offset the interest mortgage payments, but thats it, you cannot offset any capital payments.
If your wife is a lower rate tax payer or doesn't use their allowance, then you can use that to your advantage.
As you have another mortgaged property, then max out the mortgage on the rented one, and use the released money to pay down the other mortgage.
There isn't much else you can legitimately do beyond that.
If your wife is a lower rate tax payer or doesn't use their allowance, then you can use that to your advantage.
As you have another mortgaged property, then max out the mortgage on the rented one, and use the released money to pay down the other mortgage.
There isn't much else you can legitimately do beyond that.
Edited by 98elise on Friday 1st November 17:23
98elise said:
Y
If your wife is a lower rate tax payer or doesn't use their allowance, then you can use that to your advantage.
As you have another mortgaged property, then max out the mortgage on the rented one, and use the released money to pay down the other mortgage.
Interesting. I thought IR wouldn't like you to withdraw equity on a BTL to pay down your residential as to avoid tax, is this a recent loophole?If your wife is a lower rate tax payer or doesn't use their allowance, then you can use that to your advantage.
As you have another mortgaged property, then max out the mortgage on the rented one, and use the released money to pay down the other mortgage.
Edited by 98elise on Friday 1st November 17:23
Would you elaborate on the first point also. As I'm in this same situation and that could be useful.
If a property is jointly held, then rental profits are split 50/50 between the two parties and they each pay their own Income Tax bill based on their share of the rental profit.
If one of the individuals already has no income or very low income from other sources during the tax year, then they will pay a lower amount of tax compared to someone who is a higher rate taxpayer.
Therefore, splitting the income between spouses/partners may result in a lower overall tax bill compared to the situation if all the rental income was treated as being in the hands of one individual.
If one of the individuals already has no income or very low income from other sources during the tax year, then they will pay a lower amount of tax compared to someone who is a higher rate taxpayer.
Therefore, splitting the income between spouses/partners may result in a lower overall tax bill compared to the situation if all the rental income was treated as being in the hands of one individual.
rufusgti said:
98elise said:
Y
If your wife is a lower rate tax payer or doesn't use their allowance, then you can use that to your advantage.
As you have another mortgaged property, then max out the mortgage on the rented one, and use the released money to pay down the other mortgage.
Interesting. I thought IR wouldn't like you to withdraw equity on a BTL to pay down your residential as to avoid tax, is this a recent loophole?If your wife is a lower rate tax payer or doesn't use their allowance, then you can use that to your advantage.
As you have another mortgaged property, then max out the mortgage on the rented one, and use the released money to pay down the other mortgage.
Edited by 98elise on Friday 1st November 17:23
Would you elaborate on the first point also. As I'm in this same situation and that could be useful.
Eric has covered the tax advantages of a lower tax rate spouse, and he's an accountant
As already stated jointly owned means tax liability is shared equally 50/50. Other than mortgage interest, one can claim other expenses, such as insurance premium, repairs, printing, postage, accountancy fees, letting agents fees, advertising, telephone, cleaning etc. etc., and if in the case of the latter your wife does the same, then nothing stops you paying your wife.
Paying into a private pension scheme may also reduce the rate of personal tax payable.
Paying into a private pension scheme may also reduce the rate of personal tax payable.
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