[James Smith]

Nicksyb,

There shouldn’t be much if any tax due based on your figures. You are receiving £5,400 gross rent. The agency fees will be £634.50. By the time you take off the other running costs (insurance etc) your costs are likely to be well over £1,000. This leaves you with £4,400 in profits before mortgage interest. If you are renting full furnished this will come down by another £540.

Your mortgage you state is £550, (£6,600 PA) as Peter notes above only the INTEREST element of this will be tax deductible, but the fact you say you are in negative equity suggests this is quite a recent mortgage so I imagine at least 2/3rd of this will be interest. I should point out that if you ARE in negative equity then the whole cost of the borrowing wont be allowable (the market value prior to letting is the relevant value for what interest is deductible) so there might be some fiddling about with it but I cant see much tax arising from the details in your post.

From a practical point of view whether you make a profit or a loss this still needs to be declared on your self assessment tax return. Losses are actually very useful things! Although they cant be claimed against other income in this case, they can be offset against future rental incomes, ie if rents go up in the future so it is well worth doing properly as it might save you tax in a few years time even if it just seems like a fag right now. Presumably you file a return in any case bring self employed so its not much extra work for the “land and property” pages on top.

Hope that helps. Your normal accountant should be able to help you with this although I find some are really not all that clued up about let property from things I have taken on!

Regards,