new landlord question about tax

[sash70]

Hi. I'm a new landlord. I am renting out my flat, which was my own home for the past 7 years, now that I have moved. I am now renting a flat elsewhere and what I pay in rent, plus the mortgage on my flat, is greater than the rental income. As I see it, the rental income covers my rental cost, and I am just still paying the mortgage as before.
I have heard that rental income is taxed. I had a look at the FAQ's and could find some answers about paying tax on income from a second property. As I own only one property, am I liable to pay tax on the rental income? Or because it was my home before, am I exempt (which has been suggested to me by a friend - who's not a landlord!).
Thanks for any advice.

[TaxationPete]

The rental income, minus deductible costs, like mortgage interest ( only interest ), gas safety certificate annually, ( By Law ) service costs, maintenance and a load of other costs, is taxable at you marginal tax rate. You own rent you pay is not a deductible. I suggest you get a book on the subject of B2L and landlords as you have clearly entered this without doing your homework. I assume you have permission form your mortgage provider to rent the property out as this is a change of use and is a condition of the mortgage. Regards Peter

[renodci]

The rental income, minus deductible costs, like mortgage interest ( only interest ), gas safety certificate annually, ( By Law ) service costs, maintenance and a load of other costs, is taxable at you marginal tax rate. You own rent you pay is not a deductible. I suggest you get a book on the subject of B2L and landlords as you have clearly entered this without doing your homework. I assume you have permission form your mortgage provider to rent the property out as this is a change of use and is a condition of the mortgage. Regards Peter

Peter and Sash, forgive me for hijacking this thread; I'm intending to buy a property to let, and financing it by remortgaging the house I live in (currently only £18k mortgage outstanding against value of about £300k). What I need to clarify is whether I can offset the mortgage interest against rental income for tax - bearing in mind that although it is not specifically a buy-to-let mortgaage; the finance raised is for the sole purpose of buying the rental property.

Any advice would be greatly appreciated.

Thanks, John.

[thegrays2003]

Hi! Unfortunately you do have to pay income tax on any "profit" you are making on your old flat. The Capital Gains tax rules that apply to your main residence being free from tax when you sell it, don't apply to Income tax.

We too have just realised this - we are in the same position as you. I posted a thread a couple of weeks ago on this board called "Income Tax on Main Residence" which you might like to look at.

You need to try and net off as many expenses as possible against the income i.e. the interest element of any mortgage repayments (the capital element is not allowable), letting fees, mileage, if it is let furnished, wear and tear of 10% of the gross rent receivable.

There is a Dummies guide to Property tax that is quite useful.

HTH

Elizabeth

[TaxationPete]

Rather limited the mileage aspect, as you only visit the property once or may be twice a year and the trip has to be wholly and exclusively for that property or series of. Add to this that your rental business is not at your home address it is at the rental address. So take care with that one. On one forum a guy and his wife were claiming return flights from Australia to redecorate and re-let one of there properties. If you employ a letting agent then you will have trouble claiming mileage from HMRC. Regards Peter