My First Tax Return as a Landlord

My First Tax Return as a Landlord

11:39 AM, 13th October 2014, About 9 years ago 5

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Hello All,

I will soon have to complete a Tax Return I believe as I now rent out a Property.

I bought the house 12 years ago and lived in it until October last year. I had been Mortgage free for 2 years. I actually had no intention of moving at all, but a house became available that was too good to miss so I re-mortgaged my existing home with NatWest to raise 75% deposit on the new home and topped up the other 25% with a second small Mortgage.

I intended paying off the Second Mortgage over 5 years, but I have now decided I wish to try and do this by Christmas 2015 so I will again be mortgage free on my own home.

The NatWest Mortgage on the rental started in September 2013. I moved out in October 2013, but did not put a tenant in until March 21st 2014.

So my question is – when do I count the prope My First Tax Return as a Landlordrty being a rental property from?

Is it when the Tenants first move in or when I moved out of it?

Can I claim the gas, electric etc. as expenses whilst the property was empty prior to be first let?

Thanks in advance.


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Mark Alexander - Founder of Property118

11:45 AM, 13th October 2014, About 9 years ago

Hi Paul

A word of caution!

There is a 'purpose of loan' issue here.

If the Nat West mortgage was used to fund the purchase of another rental property you would be able to offset ALL of the mortgage interest paid from the point of letting the property against your rental profits.

HOWEVER, you have not used the mortgage funds for business purposes which means that you may only be allowed to offset interest on the element of the loan UP TO the original purchase price of your property.

How much did you originally pay for the property and how much did you borrow from Nat-West?

I recommend that you take professional tax advice to avoid the unnecessary expense of fines for getting this wrong and also to ensure that you obtain all tax relief due when you do eventually sell your former home. Please see >>>

Neil Patterson

12:39 PM, 13th October 2014, About 9 years ago

I have always found it a false economy to try and submit your own tax returns.

A good accountant will know exactly what you can claim for, the maximums and will save you at least what they charge for doing the return if not more.

You are also far less likely to be audited when you submit your tax returns via a trusted accountant. An audit going back years can cost a lot in time and expense.


15:13 PM, 13th October 2014, About 9 years ago

Hi - thanks for your responses. I have a friend who I went to College with, who now owns his own accounts firm. But he is dragging his feet in replying to me. Hence I sought advice elsewhere. I think I will have to go and see him and sort this out.

I originally paid £138,500 for the property. When I re-mortgaged I took out £165,000 against it. I used a Broker. He was fully aware of my intentions and plans. He spoke with several lenders for me, and the NatWest basically offered me a Mortgage at 3.1% fixed for 5 years over 20 years, on the "understanding" that "as long as I made at least two payments" I could then apply for Consent to Let and they would normally grant this.
Everyone else wanted to offer me a Buy to Let Mortgage.
So I took the NatWest offer. Played the game. Repaid a Mortgage on an empty house for a couple of months. Applied for Consent which was granted and only then did I invite an agent to put my house on the market for rental.
Took a bit longer than expected to find someone I liked. they moved in.
Now I am just trying to get my head around all of this.
A colleague of mine has just had a bit of a shock. He rents out his first home. Has done for 10 years. He went to see an accountant many years ago and the advice was "don't worry it's not making a profit". If anyone says anything, come back and see me and I will see that you don't pay any tax.
Now this advice appears to be miles from accurate. The grey area is "profit". My colleague has a repayment mortgage the same as me. And we both are now aware that we can only claim tax relief on the interest, not the capital.
Where as we were both under the impression that as the rent does not cover the mortgage payment (interest and capital) there is no tax to pay!


Neil Patterson

15:23 PM, 13th October 2014, About 9 years ago

If anyone ever needs a professional just ask us as we will only recommend people we know and have used ourselves 🙂

Mark Alexander - Founder of Property118

9:42 AM, 14th October 2014, About 9 years ago

Reply to the comment left by "Hotpl4te " at "13/10/2014 - 15:13":

I can understand why this is worrying you.

Tax advice for landlords is a complex area which some accountants are not overly familiar with. Perhaps this is why your "friend" has been dragging his heels?

What you need is an accountant who is also a landlord and who looks after lots of other landlords and has a great reputation with HMRC for accounting accurately. If HMRC find errors in the accountants for one landlord client of an accountant guess what happens to all of his other clients ............ yes, more investigations ..... more accountancy time and stress!

Your over-claim can be dealt with very easily by a competent accountant with a good record with HMRC.

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