Tax credits and renting out our house

[administrator]

Our house is up for sale but, as we have had no interest, we were thinking about renting it out and renting a house in the town we're wanting to move to. Then we can still own a property. (I dont want to step off the property ladder, it was hard enough to get on!) I was wondering if anyone knew whether such a move would affect our tax credits? We could cover the mortgage on our present house from the rental of it, but as the rent in the town we want to be in will be double our mortgage, we will need to keep our child tax credit. I work p/t, DH works f/t and we have 3DC's. We dont get working tax credit but we do get a couple of hundred ££ a month child tax which we cant do without! Can anyone help?

The rental you receive on your former home, minus allowable expenses, would be regarded as taxable income and will affect your tax credit claim. The amount you choose to pay out on mortgages doesn't affect your tax credit claim.... it's your taxable income that counts, not your disposable income.

Most of my clients make very little on their rental properties (often a loss) after taking into account mortgage interest (only), maintenance, ground rents etc. Then of course there are agency fees (if you use an agent), additional insurance for renting, and after all that you have to take into account they may trash your house or default on the rent.
So if you're planning to pay the interest and mortgage repayment back from your income you may find it's not covered when you factor in the other expenses.

Are you absolutely sure you're going to make it pay when you factor everything in?

Of course long term you end up with an asset, but short term it's not always as simply as 'it pays the mortgage'

Thanks for that. We've got a lot to think about!
Not sure we're going to go through with it after all. Think I was in a rush to get moved and thought I had hit upon a solution! Never mind, back to playing the waiting game for the house to sell.
Thanks for your help. x