melpaul2002

I am thinking of buying a 2nd house to rent out, if theres anymoney to be made I dont think there is long left to act.

Does anyone know how you get taxed on the rent,

Say Rent is 600 per month and morgage is £ 400 do you get taxed on the £ 600 or on the £ 200 you made in profit that month.

If Wife does not work but we buy in both names can I get any tax breaks cause of this.

When i finally sell the house will I pay tax on the difference between the original buy price and the now selling price ?

Can I offset tax against repairs and decorating the house?

Finally I also have to do self tax assesment at year end, with this and a buy to let should I employ an accountant to sort everything out for me, what kinda fees for this ?.

Thanks.

imlach

The interest payable on the mortgage is tax deductable (ie, not all the mortgage if it is a repayment).

You can also deduct expenses etc.

Any profit left over is taxed at your normal rate (ie, 40% if you are a high rate taxpayer - so do it in your wifes name if she is not 40%).

What we did was to ramp up the mortgage on our buy-to-let to max so we could benefit from lower tax payments on profit - and lowered our mortgage on our primary residence.....

melpaul2002

The house will need to be in both our names as Im the one thats earning to be able to get the mortgage

imlach

To illustrate :

Rent = £600/month
Repayment mortgage = £400/month (of which perhaps £300 is interest).

You can deduct the interest (£300) as an expense, which leaves the remaining £300 as profit - if you are 40% tax payer, you would pay £120 of this £300 to the taxman, pay £100 for the repayment part of the mortgage, which leaves £80 profit in your hand.

Yes, you can reduce the taxman part by claiming expenses (upkeep, general repairs, maintenance, etc).

RON

Just remember that all those repair expenses have to come out of that £80, ie, you ain't gonna be left with much for the risk, I think the days of making abundle from buy-to-let are numbered.
The only way to do it is with real money, ie, no mortgage!!!

pslewis

IMHO the housing market has peaked - the wrong time to buy I think

I have been thinking of another property - but think just paying cash is the best route - if you can!

Pete

DavidLewis

Don't forget that when you sell the property, any profit is also liable to tax. However, this isn't quite as straight forward.
For instance, we rented our flat for 7 years, never made much on the rent over the mortgage but we made a profit on the eventual sale (£65,000), since we were heavily into negative equity when we started renting it.
To cut a long story short, by the time my accountant finished applying all the different formula's and allowances over the years, we owed the taxman..........a big fat ZERO
Moral of this story.......get a good accountant

Clarebabes

Help!

I rent out my house. Mortgaeg is £335.00 per month which is a repayment mortgage, rent after expenses is £397.00 per month, plus insurance of £13.00 per month.

How much tax will I pay?

I only pay standard rate tax

russell hayward

Definition of a good accountant for those who don't know

Q : How much tax will I have to pay ?

A : How much tax do you want to pay ..

daz b

I think u can offset 10% of rent for wear and tear etc

Andrew Timmins

Clare,
daz b is correct you can claim 10% of rent for wear and tear anyway, the insurance is also a business expense and can be deducted from your income. Only the interest portion of your repayment can be claimed as an expense so you will need to look at your mortgage statement to see what proportion of the £335 is interest.

Are you going to keep the house until it is paid for in full? If not you may as well change to an interest only mortgage. Your tax position would be unchanged but you would benefit from lower monthly outgoings.

If you want a mortgage quote mail me with the house value, outstanding mortgage balance and remaining term.

Providing loan to value is less than 75% I should be able to get an interest rate of 4.76% on a buy to let mortgage, repayment or interest only.

skiddus_markus

I too am thinking of doiing this-so basically you are better off getting an interest only mortgage as the whole payment is then deductable?

Bas

Don't forget that the 10% wear and tear allowance is only deductible if the property is furnished. If it's not you can claim capital allowances at 25% per annum on the cost of any equipment you provide.

You can obviously deduct more if the mortgage is interest only but as they say..."don't let the tax tail wag the commercial dog"

In other words get the mortgage that best suits your long term plans...don't simply look at it from a tax point of view.

Cheers

Bas

skiddus_markus

My long term plans are pretty well..short term.Buy a brand new house(still affordable in Derbyshire and in short supply)rent it for 2 years and as soon as the tarmac is laid on the road-sell it and repeat as necessary.

S55 HOT

Can you take out a mortgage in joint names, then a month later transfer it in to sole names of a wife without an income ?

melpaul2002

S55 Hot, I wouldnt think so, as the debt to the bank is then in the name of a person with no income.

MarkO

Depends where you are. If you're in London, don't bother. Many other areas are saturated too. The real short-term money was made in buy-to-let by those who got in 2-3 years ago.

If you don't mind playing the long game though (5 years plus) then you will make money, regardless of the market. In particular, if you can rent a property you've lived in for 2+ years, you can take the capital gains from the eventual sale of the property without having any tax liability. So you might be better off renting your current house, and buying somewhere else to live in.

What geographical location are you planning on buying/renting in?

melpaul2002

MarkO the area is Mildenhall in Suffolk, It does well on renting due to the USA Airbase.

I was looking at doing this about 12-18 months ago and everyone was saying the increases couldnt go on forever, 18 months later and another 40% increase.

Even if it only increases by 5 - 10 % per year its gotta be better than a bank.

father_jack

We just did a buy to let this month. Remortgaged the girlfriends flat (which was paid off) and took £100k of it to put towards the new place, then rented it. The rent takes care of that flat and we've got a much smaller mortgage on the new place as a result.
As melpaul said, even if you only make 5% - it's 5% of 100k or 200k or whatever, you can't borrow that kind of money any other way.