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Advice to Letting my House (Specifically tax)


Stevo985
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Couldn't find a similar topic.

My lodger is moving out soon and rather than find another one, which proved a long process last time, I'm considering letting the whole house out and moving into a mate's flat myself.

Firstly has anyone done similar and have any advice in general? (Estate agents to use in Birmingham, advice on dealing with tenants, any potential problems I may not have thought of?)

Secondly, and more specifically, does anyone know the situation with the tax I'd have to pay on the rent I'd get for my house?

I'm not sure it would be worth it for me to do this if I had to pay full income tax (%40) on all the rent I'd get,

What I'm wondering is if I have to pay the tax on ALL the rent, or just the amount of rent that is basically a profit.

For example, say I got £600 a month rent for my house.

But to get that rent I obviously have to live somewhere else for, say, £400 a month. So really I'm only making a £200 income (in reality I won't be making anything as I imagine the rent I get will barely cover the mortage and I'd still have to pay insurances and maintenance etc which would wipe out any profit I get)

Do I have to pay income tax on the full £600, or just the £200?

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You'd be paying tax on the full amount mate.

You can then opt to deduct either:

The cost of any replacements and repairs you make during the year (i.e. not capital purchases or any improvements). I think letting agent fees quality to be deducted aswell.

Or 5% fixtures and fittings allowance.

As for the 40%, you'd only be paying that if you're in that band anyway.

Edited by Shillzz
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No, I'm afraid not.

Rack up as many expenses as you can though, and keep all your receipts for things like light bulbs etc throughout the year, regardless of where it's for. Though in reality, it won't make a huge amount of odds.

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If you let it to a friend, cash in hand, then go for it!

The other thing to consider is that you'll need a letter from your mortgage company stating that they are happy for you to rent it out, and you'll then have to show this to the letting agent.

My mortgage company won't allow me to rent my place out, so no letter, no letting. If you consider switching to a buy-to-let mortgage, then the rate will go up and probably won't be covered by the rent.

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Yeah I'm aware of the mortgage thing.

Haven't done anything serious towards this yet, but I plan to if the maths works out.

I think even if I pay the tax on the whole thing it'll be just about worth my while doing it. But I still wouldn't be better off than I would be taking in a lodger.

For some reason I'm much more comfortable about going to live with someone else than I am about having someone else live in my house.

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That's funny, I'd be (and have been) the complete opposite.

Taking a lodger in requires minimal effort, and it's all just extra money in your back pocket. Obviously you should pay tax on that, but I can't imagine many people do, I didn't.

Worked out quite well for me, and I enjoyed the company. Though it helped that she was young and relatively nice.

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You'd be surprised. The amount my mate would charge me in rent compared to how much I'd save on not having to pay bills etc at my place, means I'd save more than £400 a month (which is what I charged my last lodger and is probably the maximum I can expect to get)

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Yeah that's it. Ultimately the hassle of renting it out might be too much for me to go through with it, along with the risk that if it's unoccupied for a month thta's a huge hit for me to take, having to pay the mortgage and my additional rent.

But I'd still like to properly explore the idea.

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Bear in mind possible void periods where you're between tenants. Also the cost if you get some scutter who legs it and the damages are above the cost of the deposit, and they don't have the resources to make it worth your while going through court. and also the hassle of getting someone to leave if they really don't want to leave and you want the house back (you give a section 22 notice requesting they leave the property with a full two rent months notice, but it's onl really a request to leave - lengthy court processes are needed to actually evict someone).

I'd have thought your mortgage, or at least the interest on the mortgage, would be tax deductible though?

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And the hefty commission estate agents will take for finding new tenants which could happen every six months, on top of a large management fee if you're not letting the property yourself. I'd be tempted to find an online agency who just puts it on Rightmove. Everyone uses Rightmove these days. I put a holding deposit down on my house within five minutes of it appearing on Rightmove. A house across the street which uses an agent which doesn't advertise on Rightmove has been onthe market for four months now.

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