tax and houses and stuff

[dombanks]

ok ill try to keep the question simple.

 

i own a house with my ex. we cant sell it as the mortgage is more than the house value.

we have rented it out through an agency BUT the rental value is less than the mortgage.

we both top up the rent to pay the mortgage.

we have not changed the mortgage to a buy to let mortgage.4

we have not set up any kind of business to "manage the house"

we both pay our taxes though the PAYE system (althought this info is for me what she does is her own problem)

 

 

so what i need to find out (without dropping myself in it) is how does this affect me with respect to tax? it has been suggested that i may have to fill out a self assesment form as the rent may be classed as an income.

 

im sure i cant be the only one in this position and advice is helpful 

[Blatman]

http://www.which.co.uk/money/tax/guides/tax-on-property-and-rental-income/how-rental-income-is-taxed/

[Man On The Clapham Omnibus]

It certainly is treated as taxable income and you should be filling in an annual return.

[S2T]

You will probably find in the T&Cs from the mortgage company you are not allowed to rent out the property without advising them, same with any house insurance you have.

That said not sure if many people actually do this pragmatically

[Tyson]

Depending on the amount involved between the value of the house and the outstanding mortgage i think i would try and sell it and suffer the loss between you, it depends on your situations now. This house will hang over you for years to come before house prices increase. I would feel it is wasted money being spent with the added stress of renting......it was when i did it.....and i would want to move on with my life. Sorry it's not what you were asking, just my views. Good luck with whatever you decide to do.

[dombanks]

Thanks batman, I didn't find that one, I suspect I can get away with the paye thing but as we dont make any money on this property.

Better get onto govt then to get some forms! Sure enough the two certainties in life really exist ... Tax and death

Been round the loop with the mortgage company technically I'm re ring it out as I work away from

Home

[JeffC]

the money you take from tenants for renting the house is taxable as it is an income  even if you are not making profit from it so you do need to declare it , I am partners in my property business with my Mrs and we split the income or my accountant does so we pay as little tax as possible , in your case If you both work and have no tax relief left  you will have to split the income  50/50 and each pay half the tax due,  but you can offset the interest from the mortgage and anything you spend to upkeep the property which im guessing again will be 50/50 all this is deductible from what tax you will owe , if you can get any invoices for any building work or any household purchases      you should easily be able to wipe out any tax owed  .

 

 

also as mentioned the t&C of your mortgage will state you cant rent out your house, you really need a buy to let mortgage but  they are at a higher interest rate and if you try to change over  they will look for a big deposit as they wont do 100 % of market value loans and they defo wont do if you are in neg equity . 

[stephenh]

Dom, if as you say, the rent doesn't cover the mortgage payments which in turn will be mostly interest then net you aren't making a profit so you don't have a tax liability on the rent. Particularly if you also spend money on insurance and the odd bit of maintenance. As has already been said here, do keep full records of everything either of you spend on the property.

[ajpearson]

Sadly it is all taxable and it is a real pain in the A***. Added to that the whole child benefit thing and I am fed up with the tax system thoroughly

[Dommo]

I did the same thing a few years back. Got permission from the mortgage lender to rent for two years (they did this without any argument at all) then filled in a tax return. Once my mortgage dropped to the base rate I started making a profit on it. However, this was cancelled out by last years losses so I didn't pay any extra tax in the end.

 

Shame I couldn't have offset the losses against PAYE

[Blatman]

I think the rules are different for a property company and individuals renting out a "spare" property.

The guide I linked to from Which? (who are usually pretty reliable) clearly states you pay tax on the profit only, not all of it.

But at the end of the day it's probably better to ask an accountant or the tax man rather than a bunch of random petrol heads

[Martyn Vann - Warwickshire AO]

I think the rules are different for a property company and individuals renting out a "spare" property.

The guide I linked to from Which? (who are usually pretty reliable) clearly states you pay tax on the profit only, not all of it.

But at the end of the day it's probably better to ask an accountant or the tax man rather than a bunch of random petrol heads

 

My wife and I rent out a property and can confirm that our accountant is currently finalising tax return that will require tax to be paid on profits from rental. We will not be making any profit this year though.....!

 

Martyn

[Blatman]

That was my thinking... If Starbucks can get away with paying naff all on patently massive profits, I'm sure there are ways to... er... mitigate certain statutory expenses

[Rusty Nuts]

Speak to an accountant, but I would also speak to the mortgage and Insurance company about letting the property and changing the mortgage to “interest only” as it is only the interest that you can offset against the rental income (and repairs). But as the knowledgeable and wise have said on here sell it, take the hit and free the shackles (sometimes harder in the short term but rewarding in the long run) but obviously you know your circumstances and relationship with your ex better that any body else.

[Norman Verona]

Of course, you could just stop paying the mortgage.........