UK Landlord Forum / Life

Hi all,

           I'm at the end of my 1st year of Landlordlyness and have to say the 1st year has gone well.

Looking into book keeping, I can see that most costs can be deducted from my total profit no worries, I'm a little perplexed about the mortgage side of things. Am I right in saying that if my income from the tenant is £1000 and my mortgage monthly repayment  is £500 that my total profit that month is £1000 and I should pay tax on that, less any interest charged on the mortgage?

This is a repayment mortgage and for simplicity I have kept all other incomes / deductions out of it.

Thanks

A

Hello A,

Pleased to hear it.  Not quite, but it works out the same.  Your total income less allowable expenses is £500 and you are taxed on that gross profit.

You are only allowed to charge the cost of your interest as an expense, not the capital repayment part, which is one reason why Interest-only BTL mortgages are so popular.  You will need a statement from your bank showing what portion of your payments relate to interest.  Once you have this figure, your taxable amount is likely to increase from £500.

Also, if you've just come to the end of your first year, then you've been landlording since Mid-March 2011.  Your first tax return for the Financial year neded 5th April 2011 was due before 31st January 2012 (if filing on-line).  I suggest you find a decent local accountant to prepare your tax return for you.  They will do their best to explain why youre a year late with your first few weeks and maybe wil even be able to get you off the HMRC standard fines for late payment.

Hope this helps.

Only the interest portion of your mortgage is tax deductable not the capital repayment part. HMRC are really getting tough on this and if you have been claiming the whole amount then you can expect a visit from the revenue.

Just re-read Jeremy's reply and agree! TAx is a minefield, one which will cause a lot of expense, stress and time if you get it wrong. If you don't have an accountant get one asap as your liability if affected by whether you let your property furnished or unfurnished and choose to take the 10% yearly deduction.