CRAIGFIN

I am looking at buying a couple of houses this year and have been doing a lot of calculations with the figures. After taking the mortgage, letting agency fee (10%) and the Landlord / home insurance payments out of the rental income I can charge, I will be operating at a loss of approx £20-£30 a month per house. I am more than happy to do this as I earn a decent wage and I view the houses as a long term investment and I'm not interested in a monthly income.
My tax question is....when Self Assessment time comes round can / will the Inland Revenue tax me on a loss and if so, how will it work?

It seems weird asking this question but I'm sure the government will get some money out of me somewhere along the line. I will eventually talk to the IR closer to the time but I am hoping for a ballpark answer from somebody on here.

I'm not interested in another property market thread as I've read enough of those to last a lifetime on here, so please keep it on the tax topic.

Cheers,

Craig.

TopBanana

No

scoobynutta555

When you talk about the mortgage IIRC you can only offset any interest paid and not capital paid against your tax return. I cannot fathom how you might pay tax if your sums add up and you're actually making a loss.

///\oo/\\\

No tax on the loss (of course), provided HMRC allow the deductions you are making.

They will, of course, royally screw you on CGT when you come to sell - so make sure you keep a carefull note of and full receipts for all capital expenditure on the properties in relation to upgrades/maintenance/renovation, etc, etc, as this,. together with indexation, will mitigate the taxable gain on sale.

Flatcapdriver

You get tapered relief on CGT so its not as onerous as has been suggested but what I can't get my head round is why anyone would want to make a long term investment where you're making a loss.

A basic rule of thumb for a buy to let property is a return of at least 5%, otherwise don't bother. What your proposing is to lose circa £18k over the course of the mortgage repayment and hope you make it up on capital growth? Your also proposing to use an agent but if the area is so good for letting, then do it yourself and save the money.

Olly

IIRC you can't offset capital expenditure against CGT, as you will have already offset this against income tax

Sauron

Capital allowances are not deductable from letting income. See here- Capital allowances: introduction
For full details on lettings income/expenditure check this out Recent updates to the Property Income Manual
If you make a loss on your lettings income remember loss can only be carried forward and set against future profits, not claimed against other income. Unless you're letting a furnished holiday letting.

Olly

Try again.

IIRC you can't offset capital DEDUCTIONS against CGT, as you will have already offset this against income tax

Flatcapdriver

Bloody hell. Some of you lot obviously went to the same business school as Nicholas Smolenski. Talk about inept.

orbix

Hmm interesting remember your be making a small loss IF everything goes ok.
When/if interest rates go up you'll be making a lot more loss.
Also don't forget Elec/Gas tests, NIC report, and this deposit scheme coming in from April more expense to think about.

///\oo/\\\

However expenditure on updrades, renovation, etc, which are deemed enhancement are

AudiLover

If you go ahead with your plans prepare to be bankrupted, unless ofcourse you live out in the sticks somewhere where houses cost teenage wages