[Nicksyb]

Need some advice.

If we rent out our current house we pay £550 a month mortgage, and we can get £450 a month for the house, minus the 10% + VAT for agency fee's.

Would we still have to pay tax on the money?

And if it turns out we do have to then someone please shoot me now :sad1:

[Peter W]

It depends how much of your monthly mortgage payment is interest and how much is repaying the capital.

You only pay tax on the profit after all expenses, which usually includes mortgage interest, agency fees, repairs, insurance and utilities.

[Littledot]

http://www.thecareerbreaksite.com/wh...your-house.php

If you scroll down there is a section on renting and tax!!

Hope it helps.

Gemma

[Nicksyb]

So that will mean we will be taxed on his job, my job, my business and now the bloody rent.

I doubt there will be any profit from the rent on the house as we know we will have to make up the mortgage difference. I just wish we could sell the house, but we are in negative equity :sad1:

[Missdetermination]

Hi, hope you dont mind me asking but I was thinking of renting my house out and renting a bigger house (need more room, cant sell current house...thinking rent out for a couple of years until housing market sorts itself out). BUT I read somewhere that the rental has to cover the mortage for your mortgage lender to give you a buy to let??? Is this true, have you found any problems??

[Nicksyb]

I don't think we are changing the mortgage, just advising them we are going to be renting it out.
We are with Northern Rock and I dont think they will give any more mortgages out.

It is very hard at the moment, ideally we should sell but just can't due to the loss we would make. We are moving out of the area and will have to rent a new place, so we need to rent it out and can just afford to make up the shortfall :sad1:

[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,

[RedEvo]

Originally Posted by Nicksyb

I don't think we are changing the mortgage, just advising them we are going to be renting it out.

I'd tread carefully here. I know a lot of people have ordinary mortgages and rent their properties out but this will often mean they are in breach of contract. Non BTL mortgages often stipulate that you must live in the house. When you 'advise' them you are going to let it out the they may 'advise' you of an increase in your interest rate. Take care.

d