pisstake Posted December 2, 2008 Report Share Posted December 2, 2008 Hi I am thinking of buying a property and renting it out as furnished The property costs £80000. the down payment will be £20000 and £60000 will be a loan. I have calculated In year one my tax liability will be Based On Rent (£500*12)= £ 6000 Interest payment £ 1883 Insuarance 300 boiler car 156 wear and tear (10% of rent) 600 rapairs 250 personal expenses: 150 total profit 2661 tax 25% 665 based on the the above calculation i would be paying around 650 in tax per year this seems quite a lot. Is their any way of reducing this figure considerably without getting an interest only mortgage? Does everyone else pay around £600 per property in tax? is this a good investment? thanks for all your help I am a newbie and would appreciate your advice and experience! Link to comment Share on other sites More sharing options...
geordie100 Posted December 2, 2008 Report Share Posted December 2, 2008 Hi I am thinking of buying a property and renting it out as furnished The property costs £80000. the down payment will be £20000 and £60000 will be a loan. I have calculated In year one my tax liability will be Based On Rent (£500*12)= £ 6000 Interest payment £ 1883 Insuarance 300 boiler car 156 wear and tear (10% of rent) 600 rapairs 250 personal expenses: 150 total profit 2661 tax 25% 665 based on the the above calculation i would be paying around 650 in tax per year this seems quite a lot. Is their any way of reducing this figure considerably without getting an interest only mortgage? Does everyone else pay around £600 per property in tax? is this a good investment? thanks for all your help I am a newbie and would appreciate your advice and experience! Is your £60000 loan a 25 year mortgage..?? It sounds to me like your 1883 interest is on the low side. I rekon a 60000 mortgage over 25 yrs would be around £400pcm with at least £300 of that being interest initially costing you double your assessment. I may be wrong as i am no expert.. Link to comment Share on other sites More sharing options...
plym77 Posted December 2, 2008 Report Share Posted December 2, 2008 Hi The tax you will pay will depend on what you can claim in expenses. The rate of tax you will pay will depend on your other income. If the rental profits fall within your basic rate income then you will pay tax at 20%, if you are higher rate, this will be 40%. I am not sure where you got 25% from. Maximise the expenses you have to reduce the profits, but I have to say it is better to be making a profit and paying tax, then having so many expenses that you have no profit at all! Whether this is a good return in comparison to other specific investments is something I am unable to comment on professionally (I am not allowed as a tax adviser as it can constitute financial advice), but you have to weigh up both your annual return and potential capital appreciation (difficult to estimate in current market) against the other investment options you are considering for the £20,000 you have. I am a tax adviser and can advise on this area, but I would suggest that one of the more seasoned experts here will be able to provide you with a better opinion on the investment side. Regards Sherena Link to comment Share on other sites More sharing options...
geordie100 Posted December 2, 2008 Report Share Posted December 2, 2008 Also, don't forget other costs such as Energy cert, Corgi cert Electricity Cert Upgrades to meet the above Smoke alarms etc Link to comment Share on other sites More sharing options...
Preston Posted December 2, 2008 Report Share Posted December 2, 2008 Hi Wow, you have got a good rate of interest there - around 3.1%? I remortgaged a few properties a couple of months ago and managed to get 0.79% above base and thought that was good going! Anyway, on the face of it this is quite a good investment, largely because the loan (or debt) to value ratio (£80,000 - £6,000) is pretty good. Add your excellent interest rate to that and I'm not surprised that you will start to pay tax. My only advice is to make sure that you include all your allowable expenses; for example were there any fees associated with your loan? Depending upon exactly what they were for, they can be offset against tax. Good luck with the investment Preston Link to comment Share on other sites More sharing options...
theinvestor Posted December 15, 2008 Report Share Posted December 15, 2008 If he has a 60000 capital repayment mortgage with a rate of 5.5% Then total repayment per year is £5883 or 490.25 per month including total yearly interest is 1883. So i think he is right Correct me if i am wrong. BTW the mortgage has to be for 15 years http://www.moneymadeclear.fsa.gov.uk/tools...gage_calculator Link to comment Share on other sites More sharing options...
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