Don’t forget to tell HMRC you have investment property
I’m new here and am after some advice regarding my tax liability with my rental property. I bought a rental property two years ago and refurbished it. It has been rented out pretty much ever since. I bought it mostly because it was close to home and I wasn’t sure whether I’d have the enthusiasm for the project!
The good news is that I loved it and would do it again in a shot! The trouble is, that I did the property up, rented it out and forgot about it!
I didn’t really think about whether I should register for self assessment or what steps I should take.
I was vaguely told by someone that I could earn up to £8000 pa from it without being liable for tax as I am in full time employment, but I’m confused and not really sure what I should do!
I make roughly £200 pcm after the mortgage is paid and the agent’s fees come out.
Any advice would be greatly appreciated!
Tom
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Member Since March 2014 - Comments: 19
10:08 PM, 3rd December 2014, About 11 years ago
Unfortunately HMRC don’t consider the profit you make ie the 200 PCM. You pay tax on the income you receive ie the rent you receive. You can deduct the interest part of your mortgage costs, but not the capital. So if you are paying a capital and interest mortgage you might be in for an unwelcome surprise at how much tax you owe. As an example, if your monthly rental income is 1000, and your mortgage is 800, made up of 500 capital repayment and 300 interest. You need to pay tax on 700 PCM, which if you pay 20% tax rate would be 140 per month tax. There are other costs you can deduct as well, but that is the basics of tax relief for mortgages. An accountant will help you figure it all out. Good luck!