Newbie landlord - tax and other questions

[bushbaby_de]

My husband and I are thinking of renting out our flat. We've never done anything like this before so we are looking for any general advice and tips.

We also have a specific question about tax - I pay 20% but he pays 40% through our normal PAYE so how would the rent be taxed? We joint own the flat.

Thanks in advance.

[sherrardk]

We rent our house privately and really think our landlord is quite naive (sp). We are good tenants (really) but I think he could get in to some trouble with future tenants. I know it costs money, but I think you should go through a rental agency of some sort.

[bushbaby_de]

Hi Sherrard, yes we would go with an estate agent to manage it for us but we still need to know how it all works to make sure we've taken everything into account before deciding to take the plunge - and the agent wouldn't sort our tax out either!

[kags]

The rent will be split between you equally and taxed accordingly, assuming you own the property as joint tenants. If the actual ownership is not 50/50, say it were 90/10, this would need to be reflected in the legal ownership - ie, you would need to be tenants in common. You would need to seek legal advice about this.
Where will you be living whilst the flat is let out?

[sherrardk]

When we leave, I am going to tell our landlord that he should go through an agent (he's too trusting). He didn't know us and didn't do a credit check on us and I think he could get a lot more rent than he is doing. But on the plus side for him, we have paid for the new central heating as he didn't have the money (we just won't pay him any rent until we are all square) and we are paying to have a wood burning stove put in (it's himself's line of work). Sorry, can't help with your tax situation.

[237SJ]

You are allowed a certain amount of income from rent per year before you pay tax (I can`t remember but £5000 rings a bell) If there is a mortgage on the property, the interest can be offset against tax. As can any repairs/general maintenance. An estate agent/management company can work two ways. They can charge you a straight fee for finding you a tenant and then you manage the place yourself. Or they will advertise and find you a tenant without charge and you keep them on to manage the place for you (usually paying about 10% of the rent to them). They will sort out the tenancy agreement so you don`t need to worry about anything like that. It`s up to you to self declare at the end of the tax year.

[kags]

Rent a Room Relief (£4250) is only available if the rent is from your only, or main home, which is why I asked where they would be living.

[Buenchico]

An excellent website, with loads of information for landlords (as well as forums where you can ask specific questions):
http://www.landlordzone.co.uk/
(Click 'Taxation' - under 'Resources' for lots of relevant stuff).

Chris

[bushbaby_de]

Yes we own as tenants in common. We are going to either buy or rent elsewhere, just trying to decide whether to sell the flat or rent it out, hence I need to know everything I need to take into account to decide if the income would be worth the hassle!

[kags]

Chris's link is excellent. Essentially you will be taxed at your marginal tax rates on the excess of rent received over mortgage interest and other allowable expenses. Unless your tenancy in common shows anything other than 50/50 ownership, that is how the income will be split. If the period of letting is likely to exceed 36 months, you may then run into a Capital Gains situation when you sell the property, but only for the proportion of the gain relating to the period you did not live there.

[bushbaby_de]

Thanks for the comments and links, I'll have a plough through. Any other advice and tips also gratefully received.