UK Landlord Forum / Life

Hello,

I am new to this Landlord game.

I currently have a property that I have a mortgage of £500 an I started renting it out last year for £700 per month, how do I work out how much tax I have to pay?
Also, does my salary also come into the equation?

Thanks
Finbar

You should advise HMRC of your new source of income as soon as you can, so they can confirm how they want you to tell them about the income.
It will probably be an annual self assessment.

The income is added to your salary and taxed accordingly.
20% of the mortgage interest is deducted from the tax due for the rental income.

It's an odd time to wonder about the tax - when you've started renting the property.
I'd have thought it was quite an important part of the decision to do it or not.

Thank you JP

I will inform the HMRC tomorrow when I am off work.
I may be just dumb but where you say 20% of the interest it taken off, I don't understand...

My mortgage is 4.04% Fixed Rate that I have 2 years left of a 10 year deal and my payments are £534 per month.
I have approx. 55k left to pay on the mortgage.

Or is this a job for an accountant?

Any help in understanding would be appreciated.

Finbar

Your rental income is added to all of your other income (less the costs of running your property business - excluding interest).
Then a normal tax calculation is done, no tax on the first £12,750, 20% on anything between £12,571 to £50,270 and 40% above that (assuming it doesn't go above £150k).
You then basically deduct 20% of the interest costs from the tax owed as a restricted allowance for the finance costs.

You'll have paid most of the tax due via PAYE, so you'll have an amount to pay annually to top it up to the right amount.

That mortgage sounds like a repayment mortgage, so only the interest amount is allowed as the allowance - is it a residential mortgage with consent to let?

If this was previously your own home,did you inform the lenders and get permission,as well as informing your insurers? I think you might be wise to get an accountant to deal with your taxes.

Quote from: Finbar1972 on January 12, 2023, 03:26:20 PM
I don't understand...

Or is this a job for an accountant?

Finbar

Yes.

When you say 'new to this' when did you first receive rent?

Thanks all,

I am going to inform the HMRC today and have made an appointment with an accountant to find out exactly what I will need to pay.

Finbar

Your confusion begs the question-have you done all the necessary legal things regarding the tenancy,deposit protection, served various documents etc?

When did you start taking rent (income)?