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Finances / Finanzen » uk.finance » rental property but no tenants
| rental property but no tenants [message #383418] |
Mi, 26 April 2006 10:38 |
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Hi,
Im moving shortly but not selling my house. I will be attempting to
rent it out instead. I understand that certain things can be written
off against tax:
- mortgage interest
- wear& tear
- property inspections
- letting fees
- etc (well, I'm sure there are plenty of 'etc's)
What if noone wants to rent my house? If I try without success to rent
my house and it costs me 1000 pounds over a year, will I get (at 40%),
=A3400 back from IR? Even more extreme, if I try to rent my house and
decide to spend =A35000 to have it re-roofed, total will be =A36000 - is
there a limit to how much I can spend, especially if I get no income,
or are there guidelines about the type of work which can be carried
out? At the end of a year, if I move back to my house, are there any
implications of having had work completed which I would have
effectively paid 60% for?
Obviously best course of action is to rent the house, but even if I do
I would end up with a loss if I use the second example (ie including
re-roofing). The benefit would come if I sold the house after a year
or two. (I believe after 3 years I would have to worry about CGT
unless I was living back in the house again).
One other question: in general, is it wise to have an offset mortgage
with rental property? I guess this type of mortgage would prevent me
from claiming mortgage interest, so I am not sure it is so wise...
thanks
j
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| Re: rental property but no tenants [message #383430 ] |
Mi, 26 April 2006 11:52 |
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jimbob wrote:
> Im moving shortly but not selling my house. I will be attempting to
> rent it out instead. I understand that certain things can be written
> off against tax:
>
> - mortgage interest
> - wear& tear
> - property inspections
> - letting fees
> - etc (well, I'm sure there are plenty of 'etc's)
>
> What if noone wants to rent my house? If I try without success to rent
> my house and it costs me 1000 pounds over a year, will I get (at 40%),
> £400 back from IR?
No. You can set rental losses only against rental profits.
Worse, the rental business would not be deemed to have started
until you had your first tenant.
> Even more extreme, if I try to rent my house and
> decide to spend £5000 to have it re-roofed, total will be £6000 - is
> there a limit to how much I can spend, especially if I get no income,
> or are there guidelines about the type of work which can be carried
> out?
If you just "decide" to have it re-roofed, that would not qualify as
a repair, but would be an improvement. You can set that against
capital gain, but not against income.
If it were a genuine repair, necessary to be able to continue letting it,
yes, it would qualify as a repair, but you'd still need income against
which to set it.
> At the end of a year, if I move back to my house, are there any
> implications of having had work completed which I would have
> effectively paid 60% for?
If it looks like a scam, it is a scam, and it will not be pleasant
to find yourself at the receiving end of a tax fraud investigation,
so don't even think about trying it.
> Obviously best course of action is to rent the house, but even if I do
> I would end up with a loss if I use the second example (ie including
> re-roofing). The benefit would come if I sold the house after a year
> or two. (I believe after 3 years I would have to worry about CGT
> unless I was living back in the house again).
If you actually rent the house, it's unlikely you need to worry about
CGT before six years are up, unless the gain is phenomenal.
> One other question: in general, is it wise to have an offset mortgage
> with rental property?
Should make no difference.
> I guess this type of mortgage would prevent me
> from claiming mortgage interest,
No it wouldn't, you just need to be judicious with your accounting.
> so I am not sure it is so wise...
It's certainly unwise to run a rental business without any tenants.
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| Re: rental property but no tenants [message #383443 ] |
Mi, 26 April 2006 13:07 |
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"jimbob" <jsmyth1969 [at] gmail.com> wrote:
>One other question: in general, is it wise to have an offset mortgage
>with rental property? I guess this type of mortgage would prevent me
>from claiming mortgage interest, so I am not sure it is so wise...
I use an offset mortgage no problem. If you use one offset mortgage
for both properties you may need to make some formal declaration as to
the split - I forget. The method's been discussed before on The Motley
Fool forum and, I daresay, on here.
Use Rightmove and local newspapers to get an idea of rents.
If no-one want's to rent your house, it's because it's offered at too
high a price.
I wouldn't keep hold of it as I believe we are near the top of one the
markets periodic peaks.
Previous BTL threads here
< URL:http://groups.google.co.uk/group/uk.finance/search?q=BTL +Daytona&start=0&scoring=d&>
These are the experts - The Motley Fool - Property Investing -
Practical forum -
<URL:http://boards.fool.co.uk/Messages.asp?bid=50096>.
Links and info. on my webpage
< URL:http://mysite.wanadoo-members.co.uk/quickhelp/property.h tm>
Although beware the quality of advice given on the Landlordzone forum.
Daytona
(Landlord & tenant, not a lawyer)
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| Re: rental property but no tenants [message #383450 ] |
Mi, 26 April 2006 14:01 |
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Thanks for your comments.
>No. You can set rental losses only against rental profits.
>Worse, the rental business would not be deemed to have started
>until you had your first tenant.
Ok - thats the main point answered. So even if I am a 40% tax payer
then I will pay 40% of the net profit - full stop.
>If it were a genuine repair, necessary to be able to continue letting it,
>yes, it would qualify as a repair, but you'd still need income against
>which to set it.
I used this example as I think it will need to done in a year or so.
>I use an offset mortgage no problem.
I have an interest only (with ISA) mortgage previously, so I can see
the interest charges and capital payments being made - just wasnt sure
how that worked with offsets - more reading for me...
btw - It do intend to let it, my questoins were consideration of worst
case...(not scam case!)
thanks again
j
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| Re: rental property but no tenants [message #383461 ] |
Mi, 26 April 2006 14:56 |
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jimbob wrote:
> Thanks for your comments.
>
>>No. You can set rental losses only against rental profits.
>>Worse, the rental business would not be deemed to have started
>>until you had your first tenant.
>
> Ok - thats the main point answered. So even if I am a 40% tax payer
> then I will pay 40% of the net profit - full stop.
Yes, but fortunately there is no NI to pay on top, since rental
income, like savings interest, counts as "unearned".
>>If it were a genuine repair, necessary to be able to continue letting it,
>>yes, it would qualify as a repair, but you'd still need income against
>>which to set it.
>
> I used this example as I think it will need to done in a year or so.
Then you could get lucky. If the rental business is active at the time
(which needn't mean there is a tenant in residence at the time, but if
not there needs to have been one there before and probably afterwards)
it means you could get the repair (or part of it) paid by gross rental
income instead of from your own after-tax resources.
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| Re: rental property but no tenants [message #383697 ] |
Sa, 29 April 2006 03:12 |
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In message <1146040709.668618.289910 [at] y43g2000cwc.googlegroups.com>,
jimbob <jsmyth1969 [at] gmail.com> writes
>Hi,
>
>Im moving shortly but not selling my house. I will be attempting to
>rent it out instead. I understand that certain things can be written
>off against tax:
>
>- mortgage interest
>- wear& tear
>- property inspections
>- letting fees
>- etc (well, I'm sure there are plenty of 'etc's)
>
>What if noone wants to rent my house? If I try without success to rent
>my house and it costs me 1000 pounds over a year, will I get (at 40%),
>£400 back from IR?
Expenses on your rental business can only be set off against income from
the rental business.
--
Richard Faulkner
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