Please can someone explain how to pay tax on a rental property

[Greencheese]

Hi we are about to start renting out our old house.

I know I pay tax on any profit, but how do I work it all out?

And what can I off set? My friend just told me I cam offset cleaning products I use on it and the paint I'm using to freshen it up. Anything else?

Thanks.

Income is the rental
main cost : mortgage interest ( NOT the capital part)
then insurance, gas certs
all costs to bring it up to a standard to rent out : diy materials etc
then once its up and running ... travel to check it every month etc

you'll need to register for self assessment if you have not already
and remember that CGT kicks in after 18 months ... just in case

You will need to read the land and property notes for a tax return once you have done that it's pretty straight forward.

www.hmrc.gov.uk/manuals/pimmanual/index.htm

CGT will not necessarily kick in as, if the property was you home before, then letting relief is available. Otherwise the advice is correct - all rental related expenses can be deducted from the rental income. Typical ones are: mortgage interest, estate agent's fees, repairs to the property, gas certificate.

Register with HMRC for self assessment although you won't need to complete it until next October earliest.
Keep track of any direct expenses such as maintenance (not home improvements), fees , insurance, service contracts, interest on mortgage (not capital repayments) etc
Keep note of the gross income from rent
Any difference is liable for income tax but if you both own a share you can split this between you.

Thanks, really useful info there. Both my husband and I earn the same so that shouldn't make much difference with regards to tax I don't think.

I'll get on to HMRC on Monday.

How do I know what the mortgage interest part is?

On a buy to let mortgage statement it will break down for the year what is interest payment and what is repayment.

I do this
A= Rental income
B= Expenses (insurance, gas check, repair, maintenance, gardening, travel costs, products-paint, cleaning stuff legal, letting and advertising fees) [we don't have a mortgage on ours]
C= profit
So A-B=C

Also if we clean, repair, paint etc ourselves, we pay ourselves an hourly rate and keep a record of it.

register for self-assessment, and then it all goes on the tax return and the system works it out for you. There is plenty of guidance on the HMRC site so don't go by 'I heard' or 'my friend'.

the deadline for the return for the 2014-15 tax year is Jan 2016 if you do it online - but get it done next summer when the systems are lightly loaded.

here are some hints for you to check.

• you can offset mortgage interest, agents fees, expenses such as gas safe check, materials for repairs and maintenance (not improvements). You cannot claim for your time.
• if it is jointly owned, you both do a tax return and each claim half the profit and half the expenses. They ask if it is all shared, but bizarrely not with whom!
• keep all records for at least 7 years.

make sure you are fully aware of all your other obligations, have all the right insurances and are able to respond quickly to any problems. If you can't, pay someone who can.