Renting out my flat
Discussion
Not sure if this is in the right forum or not but.....
I currently own a flat near Newcastle. When I say own I have a mortgage on it with about 5 years paid off. Its risen a fair bit in value since I've owened it and it seems that the rental value is a fair bit higher per month than my mortgage repayments.
Now here's the potentially mad bit. I'm thinking of letting it out and renting a place closer to the City centre. You see the problem is that I used to live with my girlfriend but she's now long gone and I'm bored living on my own so far out of town. I also changed jobs since I bought this place and have a bit of bitch of a commute. A good friend of mine is looking to rent in an area I'd like to live so there is an option for me there.
What I'd like to know are the things I need to consider to rent this out. I'm talking about things like tax implications, insurance, safety certificates etc... I'm going to need to know all this before I know if its financially viable. Also is it a daft idea?
I currently own a flat near Newcastle. When I say own I have a mortgage on it with about 5 years paid off. Its risen a fair bit in value since I've owened it and it seems that the rental value is a fair bit higher per month than my mortgage repayments.
Now here's the potentially mad bit. I'm thinking of letting it out and renting a place closer to the City centre. You see the problem is that I used to live with my girlfriend but she's now long gone and I'm bored living on my own so far out of town. I also changed jobs since I bought this place and have a bit of bitch of a commute. A good friend of mine is looking to rent in an area I'd like to live so there is an option for me there.
What I'd like to know are the things I need to consider to rent this out. I'm talking about things like tax implications, insurance, safety certificates etc... I'm going to need to know all this before I know if its financially viable. Also is it a daft idea?
Obviously, the rental income will be taxable so you will need to complete Self Assessment tax returns each your so that theis rental income can be disclosed to the Revenue and the correct tax paid on it. It is your legal obligation to notify the Revenue and to obtain the Self Assessment tax return.
If and when you sell the flat, the gain on disposal may be subject to Capital Gains Tax. However, as the property has been your main residence, the taxable element of any gains will be reduced in proportion to the total number of years of ownership compared to the number of years it was your main residence. Also, the last three years of ownership will be automatically treated as if it had been your main residence, even if you are now living elsewhere.
Finally, any gains will be reduced by your CGT annual allowance (currently £8,800).
If and when you sell the flat, the gain on disposal may be subject to Capital Gains Tax. However, as the property has been your main residence, the taxable element of any gains will be reduced in proportion to the total number of years of ownership compared to the number of years it was your main residence. Also, the last three years of ownership will be automatically treated as if it had been your main residence, even if you are now living elsewhere.
Finally, any gains will be reduced by your CGT annual allowance (currently £8,800).
I would also suggest that you get written permission from your mortgage lender. If you are not tied into your policy it probably won't matter, but if you are they might charge you a penalty or change the product and therefore the rate at which you have borrowed.
When I enquied about renting out my place I only had to complete a one page form and pay an administration fee. I can't remember how much it would have been but I ended up buying a btl instead.
If you have made a massive capital gain from it I would suggest selling before 3 years of renting it out to avoid paying cgt. Unless you expect to live there again, chances are it will not appreciate enough to warrent keeping it longer. You'd be better off banking the cash or paying off your other mortgage asap while interest rates are reasonably low, imo.
When I enquied about renting out my place I only had to complete a one page form and pay an administration fee. I can't remember how much it would have been but I ended up buying a btl instead.
If you have made a massive capital gain from it I would suggest selling before 3 years of renting it out to avoid paying cgt. Unless you expect to live there again, chances are it will not appreciate enough to warrent keeping it longer. You'd be better off banking the cash or paying off your other mortgage asap while interest rates are reasonably low, imo.
Gad-Westy said:
Thanks for the help gents. Certainly food for thought. Somebody else has mentioned the possiblity of going to an interest only mortgage but I'm not sure of the benefits of this in the current market. I've got no ties to my current mortgage by the way.
if you're in the newcastle area old boy, I don't mind meeting you for a pint to talk over your options - i'm on the outskirts near kingston park
...oh, and I do this sort of housey stuff for a living too
Edited by minimax on Monday 4th December 11:13
minimax said:
Gad-Westy said:
Thanks for the help gents. Certainly food for thought. Somebody else has mentioned the possiblity of going to an interest only mortgage but I'm not sure of the benefits of this in the current market. I've got no ties to my current mortgage by the way.
if you're in the newcastle area old boy, I don't mind meeting you for a pint to talk over your options - i'm on the outskirts near kingston park
...oh, and I do this sort of housey stuff for a living too
Edited by minimax on Monday 4th December 11:13
That would be great thanks. If it suits you, I'll wait till the madness of Christmas is all done and be in touch after New year. Thanks again.
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