advice about letting out my house

[twinsetandpearls]

I am renting out my house as we can't sell, we are not making nay money in fact we are loosing as it is to my sister and she can't afford to cover the mortage , so there is a shortfall of about fifty quid a month. We are happy to subsidise by that amount as we know the house will be looked after and there is flexibility over putting the house back on the market.

How do I declare her rent for tax purposes, am I right in thinking that as we are not making any money we will not have to pay tax?

You have to declare any income from letting on your annual tax return. You have to keep a record of all your expenses and income relating to it and work out the annual profit/loss. You will only get taxed on any profit you make.

So I just keep a record of rent payments and mortgage payments and then fill in a tax return.

We don't claim tax credits or anything so it should be quite simple.

On my tax return do I put on my teachers wage, or is that separate as I have paid my tax and NI on that.

Sorry if I am being thick.

Well you also need to include your mortgage interest payments (not endowments) as part of your costs and any other things that you spend on the house, such as buildings insurance, maintenance expenditure, gas safety certificates and inspections etc etc. You can also factor in 10% of the rental income as 'wear and tear'. If you use an agent, then the percentage you pay them also counts as an expense.

No we are not using an agent. Had not thought of the 10% wear and tear, we will be making quite a significant loss. We may end up looking dodgy!

You will have to declare all your income. Your salary, any interest earned from savings, shares, bank accounts aswell as rental income.

Thanks Pesto.

You're welcome
and
Good luck!

You declare it on the same standard tax return, under income. Only interest for the mortgage can be offset against the rental income (not any repayment element, endowments or payment protection insurance) and also any maintenance costs such as the obligatory Gas Inspection and service contracts, fees including insurance). So the net effect should be negative. If you co-own you can split the income between you too.

I dont think its correct that as you are not covering the full mortgage payment you dont have to pay tax.

After x amount of weeks I believe you can offset some of the mortgage interest against tax but not the repayment part as you are benefitting from that. You also need to register with the tax office if not already self employed.

I assume your mortgage and insurance has been switched to buy to let and any deposit put in the secured scheme. Keep the gas maintenance record safe and ensure you know the date it again needs to be done by. Same goes for any electrical appliances if left.

Forgot to say, make sure you are aware of the CGT issues when you do come to sell - its ots a short term let your personal allowance may cover it - depends on the length of renting.

We only want to rent it out for a year so as long as we do manage to sell it should be ok. We are also not buying another property until we have sold this one although I am not sure if that matters.

I am renting to my sister who does not have the money for a deposit so we are not taking one. She are doing each other a favour really, I am charging her below the market rate and there are no agents, but I want to declare it so everything is above board.

It does all sound more stressful that I had thought.

YOu ahve to decalre it but we don't make any money so don't pay tax

you won't have to do this until Octber next year if she's only just stated renting. IIRC rental income of less than £15k a year does not need a detailed return either you just put the figuers on - income v's expenses. Is it an interest only mortgage you are talking about. Deposits are not compusory so if you didn't get one that's less paperwork and hassle for you - provided that everthing is okay when she leaves.

thanks firsttimemama