Letting my property - advice

Letting my property - advice

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arun1uk

Original Poster:

1,045 posts

197 months

Monday 29th September 2014
quotequote all
Afternoon all,
I'll looking to rent my property in the next few months and just looking for some advice/guidance from other people who have done the same.
Is there a checklist that you used? Do I need to set up a ltd company to receive the rent? etc

I've spoken with an estate agent and have already found a potential tenant (corporate) who is willing to pay 1yr rent up front!

Any help would be really appreciated.

Thanks

Simpo Two

85,147 posts

264 months

Monday 29th September 2014
quotequote all
You don't need a Ltd Co (just declare the income to HMRC) but you do need to get a proper contract drawn up by someone who knows.

Eric Mc

121,774 posts

264 months

Monday 29th September 2014
quotequote all
As Simpo says, no necessity to set up a limited company. The vast bulk of private landlords do not do this.

Once you have started letting the property, you need to notify HMRC that you are doing so. They will then issue you with a notice to complete a Self Assessment tax return so that you can return the rental income to them and also to notify them of the self assessment tax amount you will owe them for each tax year the property is rented out.

If you already complete a self assessment tax return for other reasons, all you need to do is make sure that you complete the "Land and Property" section of the tax return for the relevant tax years.


rfisher

5,024 posts

282 months

Monday 29th September 2014
quotequote all
Can losses on the btl property be offset against your tax bill?

So, for example, if the property in not let for 6 months but you still have expenses (mortgage, council tax), can this be claimed on the tax return?


Eric Mc

121,774 posts

264 months

Monday 29th September 2014
quotequote all
rfisher said:
Can losses on the btl property be offset against your tax bill?

So, for example, if the property in not let for 6 months but you still have expenses (mortgage, council tax), can this be claimed on the tax return?
Tax relief CAN be obtained for rental losses BUT ONLY BY OFFSETTING THESE LOSSES AGAINST FUTURE RENTAL INCOME.

So, if in a given tax year your rental income and expenditure accounts show a rental loss, you still return the figures on the self assessment tax return. You will pay no tax on the rental income for the year (because there is, in effect, no rental income) and the loss generated is carried forward to the NEXT tax year where it can be subtracted from next year's rental profits.
If NEXT year also shows a loss, the losses are amalgamated and carried forward until the time the property starts generating a profit at which point they can be offset.

You need to be very aware of what costs can be claimed and, in particular, be aware that HMRC DOES NOT allow capital costs (such as extensions, window upgrades, kitchen upgrades etc) as "rental costs". They will only allow regular repairs and maintenance expenditure.

Capital costs are added to the original cost of the property and you will get tax relief for those costs when the property is eventually disposed of. For example, if you purchased a house for £200,000 and spent (say) £50,000 on an extension, new double glazing and a modern kitchen, then the "cost" of the property for Capital Gains Tax purposes would be £250,000, not £200,000.

rfisher

5,024 posts

282 months

Monday 29th September 2014
quotequote all
Thanks Eric thumbup.

Simpo Two

85,147 posts

264 months

Monday 29th September 2014
quotequote all
Eric Mc said:
Tax relief CAN be obtained for rental losses BUT ONLY BY OFFSETTING THESE LOSSES AGAINST FUTURE RENTAL INCOME.
Wouldn't it be nice if 'rental losses' included unpaid rent.

Bet it doesn't...

Old Merc

3,486 posts

166 months

Monday 29th September 2014
quotequote all
Have you been living in this property yourself as your main home? ? If so and you have a mortgage the lender will have to be informed.Also make sure you have it fully insured for letting.You will have to get a landlords certificate for the gas boiler etc.
get plenty of advice on all the legal stuff etc etc.

I let my house through one of the biggest agents in my town,very expensive.They got me a tenant from hell,loads of problems,took months to get them out.All I got was £350 compo to redecorate two rooms.
After that experience I did it my self,found someone I new and trusted as a tenant,never had any more problems.


Eric Mc

121,774 posts

264 months

Tuesday 30th September 2014
quotequote all
Simpo Two said:
Eric Mc said:
Tax relief CAN be obtained for rental losses BUT ONLY BY OFFSETTING THESE LOSSES AGAINST FUTURE RENTAL INCOME.
Wouldn't it be nice if 'rental losses' included unpaid rent.

Bet it doesn't...
Well, it does.

If your costs exceed your rental income (for whatever reason - including unpaid rent), then you won't pay tax on the rent you never had.

In recent years, the way rental income and expenditure accounts was changed to reflect a method closer to that used in preparing business trading accounts.
Therefore, initially you might have to include rental income even if you haven't actually received it (i.e. account for debtors as businesses normally do). However, if a tenant fails to pay the rent you might have to write the debt off (i.e. treat it as a "Bad Debt"). The Bad Debt write off is a legitimate cost of the rental activity, so you will get tax relief for it.

arun1uk

Original Poster:

1,045 posts

197 months

Tuesday 30th September 2014
quotequote all
Thanks all,
Does anyone have (or has used) a simple checklist for when renting your property by any chance, please?
Simple things like:

- Gas safety cert
- EPC
- Landlord insurance
- Inform Council
- Do we need to inform Flat management company
etc

Would really appreciate the help - we're at the stage now where we're ready to commit and just wanted to double check everything.

Cheers in advance.

Sir Bagalot

6,463 posts

180 months

Tuesday 30th September 2014
quotequote all
arun1uk said:
I've spoken with an estate agent and have already found a potential tenant (corporate) who is willing to pay 1yr rent up front!
Corporate tenants don't pay rent 1 year up front!

Cannabis Farmers dolaugh

dazwalsh

6,095 posts

140 months

Saturday 4th October 2014
quotequote all
arun1uk said:
Thanks all,
Does anyone have (or has used) a simple checklist for when renting your property by any chance, please?
Simple things like:

- Gas safety cert
- EPC
- Landlord insurance
- Inform Council
- Do we need to inform Flat management company
etc

Would really appreciate the help - we're at the stage now where we're ready to commit and just wanted to double check everything.

Cheers in advance.
Top 3 on your list are essential, anything after is down to the situation.

I would add in mains powered interlinked smoke alarms as tenants can be amazing in their stupidity. I had a tenant remove the batteries from all 3 smoke alarms once to put in her children's bloody toys!

I would also strongly suggest an electrical periodic inspection to be carried out every 5 years. Its not compulsory ( although it should be if you ask me) but you have a duty of care for the tenants health and safety and this covers your arse and gives you piece of mind that the electrics are safe.


arun1uk

Original Poster:

1,045 posts

197 months

Saturday 4th October 2014
quotequote all
dazwalsh said:
Top 3 on your list are essential, anything after is down to the situation.

I would add in mains powered interlinked smoke alarms as tenants can be amazing in their stupidity. I had a tenant remove the batteries from all 3 smoke alarms once to put in her children's bloody toys!

I would also strongly suggest an electrical periodic inspection to be carried out every 5 years. Its not compulsory ( although it should be if you ask me) but you have a duty of care for the tenants health and safety and this covers your arse and gives you piece of mind that the electrics are safe.
Excellent advice, really appreciate that. Just had the EPC completed, Gas Safety next week so will try and get the Elec certification at the same time too.

Wings

5,808 posts

214 months

Tuesday 7th October 2014
quotequote all
arun1uk said:
- Do we need to inform Flat management company
etc.
You would be well advised to read your lease, and to mirror the terms in your tenancy agreement to that of the lease, ie. pets, use of communal area etc.

The Flat's Management Company should have a building insurance policy in place, therefore only contents insurance is required.

All my leasehold flats i rent out void of all furniture, with the only white goods being a cooker, this removes my legal responsibility for fire, health & safety issues, together with repairs for the same etc.

Any non resident landlords should take action to avoid property fraud, this being achieved by registering with HM Land Registry

https://www.gov.uk/protect-land-property-from-frau...

Lastly, Letting and Property Managements Agents have until 1st October to register with one of three redress schemes, in the event of any future disputes, both landlords and leaseholders will be able to hold their agents to account with the registered schemes. So worth checking agents are registered, if not then the local council with hold the agents accountable with a civil penalty of up to £5000.00.

http://www.tpos.co.uk/




CRB14

1,493 posts

151 months

Tuesday 7th October 2014
quotequote all
Depending on what mortgage you are on (I haven't read every post) you may need to obtain permission from the lender.

A decent letting agent should be able to sort everything out for you in relation to gas safety certificates and whatnot. If they can't advise you on that I'd be using somebody else to be honest.

Vocal Minority

8,582 posts

151 months

Tuesday 7th October 2014
quotequote all

EDIT: Sorry it seems you mean residential.

Though IMO the year up front rent poses a few questions....(I presume it isn't cash...)

NickXX

1,546 posts

217 months

Tuesday 7th October 2014
quotequote all
Eric Mc said:
You need to be very aware of what costs can be claimed and, in particular, be aware that HMRC DOES NOT allow capital costs (such as extensions, window upgrades, kitchen upgrades etc) as "rental costs". They will only allow regular repairs and maintenance expenditure.
Not correct on the window upgrade front - these are an allowable taxable deduction.

HMRC said:
An example is double-glazing. In the past we took the view that replacing single-glazed windows with double-glazed windows was an improvement and therefore capital expenditure. But times have changed. Building standards have improved and the types of replacement windows available from retailers have changed. We now accept that replacing single-glazed windows by double-glazed equivalents counts as allowable expenditure on repairs.
http://www.hmrc.gov.uk/manuals/pimmanual/pim2020.htm

arun1uk

Original Poster:

1,045 posts

197 months

Tuesday 7th October 2014
quotequote all
Yes - corporate let with a reputable company, who have an ex-pat working here for 1 yr. They have committed to paying the 12 month rent up front - so I will declare this via self assessment, minus the deductibles such as mortgage interest and services to maintain the upkeep of the property.

I was conscious at first so I asked to speak with the company and they explained everything in detail and we also met the tenant. All seems to look legit.

Eric Mc

121,774 posts

264 months

Wednesday 8th October 2014
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NickXX said:
Thanks for that. Obviously they had a change of heart.

hornet

6,333 posts

249 months

Wednesday 8th October 2014
quotequote all
Eric Mc said:
You need to be very aware of what costs can be claimed and, in particular, be aware that HMRC DOES NOT allow capital costs (such as extensions, window upgrades, kitchen upgrades etc) as "rental costs". They will only allow regular repairs and maintenance expenditure.
Out of interest and because I'm going through this process myself, where does the line between "wear and tear" and capital costs sit? For example, I had new carpets put in before letting my flat, as the old ones were a) rubbish and b) worn out. I was planning on that being an offsetting expense, but seems to be a rather grey area. Not a big deal in the scheme of things, but I've never self assessed before, so I'm erring on the side of caution to avoid any problems.