Renting out own home to rent another?
Discussion
Advice required for my brother who curently owns a home in London and has a mortgage. Work is taking him up north to Manchester for at least 3 years. He is considering renting his own home out down in London as he does not want to sell it and he is also tied in to a mortgage for another 5 years (recently remortgaged at a good rate). He has been told by the mortgage company this is possible via a consent to lease arrangement as they will add 1% to his current interest rates.
Say he rents outs the London home for £1200 and his mortage payments are £1200 too there is no profit made and he breaks even - the rent pays his mortgage but any upkeep or maintainece will be his problem but in no way is he making a profit on this letting.
Does he still need to pay tax on this rental income and if ao how much?
His place he will rent in Manchester will cost £950 a month.
He is letting his only residential property and is not a buy to let investor so in this case what are his tax liabilities tomrent his own home For three years? Thanks
Say he rents outs the London home for £1200 and his mortage payments are £1200 too there is no profit made and he breaks even - the rent pays his mortgage but any upkeep or maintainece will be his problem but in no way is he making a profit on this letting.
Does he still need to pay tax on this rental income and if ao how much?
His place he will rent in Manchester will cost £950 a month.
He is letting his only residential property and is not a buy to let investor so in this case what are his tax liabilities tomrent his own home For three years? Thanks
I believe under Mr. Osborne's forthcoming tax changes the profit will be calculated as £1200 from 2017(?). So he will screw your mate whether it's his ex residential home or not.
I let out my ex marital home of 17 years to fund my rented home and believe that I too will be swept up in these unfair tax laws.
I let out my ex marital home of 17 years to fund my rented home and believe that I too will be swept up in these unfair tax laws.
It doesn't matter if its his only rented property, its still let so is liable to tax in the same way as any BTL.
Tax changes will soon mean that tax may be due even if he's not making a profit, (even if its making a loss).
The government seem hell bent on stopping individuals from moving into the investment or business world.
Tax changes will soon mean that tax may be due even if he's not making a profit, (even if its making a loss).
The government seem hell bent on stopping individuals from moving into the investment or business world.
How much of the £1,200 repayment is interest and how much is Capital Repayment?
Under current rules, the INTEREST element of the repayment is an allowable cost when calculating the annual profit or loss on the rental property.
The allowabillity of interest against rental income is being restricted from tax year 2016/17 onwards. This means that over the next five years, a landlord's tax liability on his rental profits will increase as the interest claim becomes less and less available for offset.
Under current rules, the INTEREST element of the repayment is an allowable cost when calculating the annual profit or loss on the rental property.
The allowabillity of interest against rental income is being restricted from tax year 2016/17 onwards. This means that over the next five years, a landlord's tax liability on his rental profits will increase as the interest claim becomes less and less available for offset.
Eric Mc said:
How much of the £1,200 repayment is interest and how much is Capital Repayment?
Under current rules, the INTEREST element of the repayment is an allowable cost when calculating the annual profit or loss on the rental property.
The allowabillity of interest against rental income is being restricted from tax year 2016/17 onwards. This means that over the next five years, a landlord's tax liability on his rental profits will increase as the interest claim becomes less and less available for offset.
Guess it will be 51% Capital and 49% Interest. Under current rules, the INTEREST element of the repayment is an allowable cost when calculating the annual profit or loss on the rental property.
The allowabillity of interest against rental income is being restricted from tax year 2016/17 onwards. This means that over the next five years, a landlord's tax liability on his rental profits will increase as the interest claim becomes less and less available for offset.
Eric Mc said:
The allowabillity of interest against rental income is being restricted from tax year 2016/17 onwards. This means that over the next five years, a landlord's tax liability on his rental profits will increase as the interest claim becomes less and less available for offset.
Eric - 2016/17 is not restricted but the final year of the current rules - the restrictions start from 5th April 2017.Hope that isn't what you have told your clients!!
David
sumo69 said:
Eric Mc said:
Are you worried about my clients?
That's very thoughtful of you.
I know - just making sure standards are maintained.That's very thoughtful of you.
the restriction of relief starts in the 17/18 tax year and is phased in so that the withdrawal is fully implemented in and from the 20/21 tax year
it is clause 24 in this document
https://www.gov.uk/government/uploads/system/uploa...
it is clause 24 in this document
https://www.gov.uk/government/uploads/system/uploa...
Eric Mc said:
I was wrong. I have no problem admitting that. What I didn't like was Sumo's second comment.
There wouldn't have been a 2nd comment if you would have not tried to deflect my correction via a sarcastic statement rather than admitting the mistake, which I am sure wasn't deliberate.Its a public forum so if anyone posts a factually significant error, then be prepared to get shot at or don't post - I accept that and so should you.
David
I do accept the pointing out of the error. I have no problem with that. I don't accept what you said next regarding how I handle my clients which was completely unnecessary and as far as I am concerned, downright unprofessional..
I would NEVER cast aspersions on your ability to deal with your clients on a public forum out of professional respect. Your comment lacked that - which to me is extremely unprofessional. There is more to being a professional than being 100% factually correct.
As ever, it's not what people say that really matters, it's how they go about saying it.
I would NEVER cast aspersions on your ability to deal with your clients on a public forum out of professional respect. Your comment lacked that - which to me is extremely unprofessional. There is more to being a professional than being 100% factually correct.
As ever, it's not what people say that really matters, it's how they go about saying it.
Eric Mc said:
As ever, it's not what people say that really matters, it's how they go about saying it.
Correct - as my previous post intimated. You replied with a sarcastic response rather than correcting your mistake at the earliest opportunity.I could say that is unprofessional, but this is spoiling the thread so I think we should stop this now.
If you want to PM me to "discuss", you can.
David
It was your personal comment "Hope that isn't what you have told your clients!!" that set me of. I doubt you will want to apologise for that so I won't ask you to.
If you had a personal comment to make about how I run my practice, you should have PM'd me rather than make such a comment on a public forum.
But, I will leave it there.
If you had a personal comment to make about how I run my practice, you should have PM'd me rather than make such a comment on a public forum.
But, I will leave it there.
2Btoo said:
To return to the topic raised by the OP .... I thought the new rules restricted the loan interest that could be offset against higher-rate tax, but you could offset it all against regular-rate tax.
Am I wrong? (Did my question make sense?)
That is correct. By restricting the interest against basic rate tax you will get less tax reduction then you did in the past. In some cases, this will mean some landlords will pay tax on rental income even if the property is generating an actual loss.Am I wrong? (Did my question make sense?)
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