Renting out own home to rent another?

[anonymous-user]

2Btoo said:

Thanks. If my understanding is correct then that circumstance would only arise if the landlord is a higher-rate taxpayer from income not related to the house he is renting out, non?

No, that is incorrect

The gross rent - allowable costs (but not finance costs) will count as income

Edited to tidy up and correct

So, for example if you have a rental that makes £12k rent and has £1k costs + £8k interest just now, you would only be taxed on £3k and only £3k property income is shown

In the new regime the £8k interest counts as income (but you can claim basic rate tax back against it). One will, therefore, see a scenario where rental income pushes people into higher tax brackets as a result of the changes (not as a result of how much more gross income they have).

Edited by anonymous-user on Friday 20th November 12:36

[Eric Mc]

Rental income is taxed on the profit derived from the rental property, not the gross income from the tenants. The profit is arrived at by deducting allowable costs incurred by the landlord, such as property insurance, repairs and maintenance, ground rents or service charges paid by the landlord, agents' fees - and loan interest.

The problem is that, from 6 April 2017 , the way in which tax relief is given on the loan interest will be restricted, so you won't get the full tax relief that you currently get.

There is an Autumn Statement coming in a few day's time and it will be interesting to see if the Chancellor reveals any further information on this particular change.

[dai1983]

Another thing to consider is that if the property is let for more than 18 months then there may be CGT to be paid if he decided to sell instead of moving back in