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General Chat Thread, Any knowledgable people? Tax + renting in General; Hi, Does anyone have a thorough knowledge of tax when renting out properties? I need to know if i'm still ...
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    mrbios's Avatar
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    Any knowledgable people? Tax + renting

    Hi,

    Does anyone have a thorough knowledge of tax when renting out properties?

    I need to know if i'm still required to pay tax on incoming rent if the rent doesn't cover the cost of the mortgage payments, as the wording on the directgov website says "You pay tax on any profit as part of your overall income" but i wouldn't call it profit if it doesn't cover the mortgage.....at least that's the way i see it, is that how the government see it or am i being too hopeful?

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    bodminman's Avatar
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    Rent is classed as income and is therefor taxable. Get a free 1/2 hour with an accountant!!!

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    The government consider any profits as taxable and as your mortgage is tax deductible then you wont be making a profit. Essentially you will be making a loss so you will not need to pay tax. You will however still need to declare this to your tax office and declare the earnings, they will then record your earnings even at a loss and you can carry this loss over every year until you make a profit.

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    mrbios (21st January 2011)

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    You can claim back tax for the interest part of the mortgage as thats an expense. You need to get an annual statement off your mortgage provider details interest paid and claim it back. You can claim for other expenses susch as maintenance of the property and depreciation of fixtures and fittings.
    Full details are here but it's one of those things where hiring a decent accountant who knows this stuff inside out is worth the money.

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    mrbios (21st January 2011)

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    An accountant would be a good idea, even just to make sure you are doing it all correctly. May I recommend this site Property Investment | Landlord Blog | Landlord Advice | Landlord Information - WARNING - There is a lot of swearing on this site but it's a landlords blog and he seems to post a ton of information.

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    mrbios (21st January 2011)

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    mrbios's Avatar
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    Fantastic, luckily my partners uncle is an accountant so fingers crossed he can help here.

    Thanks for the advice and links

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    m25man's Avatar
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    All of your expenses, including Furniture Fixtures and Fittings required to make the property ready for rental, Agents or Management Fees, Lanlords Insurance and any interim maintenance and repairs are all tax deductable.
    Anything earned over and above those expenses are Taxable Income and therefore must be included in your Tax Return.
    IF you do not normally make a Tax Return because you are an employee on PAYE you will need to register with your local Tax Office and ask to make a supplimentary return because if you dont and you later get caught they will nail your bits to the table!

    I dont see why you would need to engage an accountant and incur and additional expense if this is your only extra taxable activity.... if you have other income sources such as Shares/Dividends or earning from a second job you would probably benifit from the advice of an accountant but for earnings of £10k or less an unaudited single page Excel Spreadsheet showing income and expenditure on the property is all you will need to keep the Taxman happy.

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