Taxation

[adonaghy]

First of all, thanks for help from forum members so far. Much appreeciated.

Ive an unencumbered property I let fetching around 5k per annum. (My old home). Ive seen a property at £135 that I would like to have for pension or potential home. Looks like and ok yield according to previous posts.

My question is if the new property initially incurs a loss and my other one continues to make a profit, can one be offset against the other on tax returns or must each be presented alone,

Thanks

[Richlist]

Looks like and ok yield according to previous posts.

How have you arrived at that conclusion ?

There are plenty that wouldn't agree with that statement.

All your residential property lets are pooled ie total income, less total expenses = total profit.

That profit is then added to any other income from self employment, PAYE etc and you will pay tax on that income.

Commercial lets & holiday lets are handled separately.

[adonaghy]

I was looking at yield from a more personal angle than business Richlist. My aim ultimately is to sell my unencumbered property (2 bed mid terrace) in time and end up with a nicer 3 bed semi fully paid off by the time i retire due to the two rents I will collect.

Is it worth me ensuring both properties are mortgaged to the max and place the cash in an interest bearing account, so it can be offset with the tax. Or do I leave the unencumbered property as is. I plan to put 25per cent deposit down on £135k new house, so it will be mortgaged anyway.

I know questions are from a personal rather than purely business, but Id love to use my current personal circumstance to allow me to buy this fabulous house without considering that I may be considering financial stupidity to achieve it.

?

[Richlist]

I was looking at yield from a more personal angle than business Richlist

I don't understand the difference......can you explain ?

[adonaghy]

My aim is to have one lovely house to rent in or live in in 10 yrs time and to eventually sell unencumbered property to achieve this. Im not so concerned about making loads to spend (I wish), but does this idea make any financial sense?

Should i have both properties heavily mortgaged to gain most benefit, even though this means money sitting in bank in readieness for when I can pay off 135k in full?

[Richlist]

Whether you like it or not its a BUSINESS decision that you will be making. The result of that decision may affect your personal life but it doesn't alter the fact that its a business decision.

Should i have both properties heavily mortgaged to gain most benefit, even though this means money sitting in bank in readieness for when I can pay off 135k in full?

You will need to do the math. You will need to compare the net interest you will potentially receive on any savings/ investment accounts with mortgage rates (less the tax allowance offset).

Based on your other comments....Im not so concerned about making loads to spend (I wish), ......if you do decide to mortgage the properties then I would suggest a repayment mortgage (as opposed to interest only)

Talk to a local mortgage broker to see whats available.