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Landlord tax and selling on


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Hi Folks

I was reading the recent post with interest and concern and hope someone can advice me on how I stand on the taxation front.

I bought a house late 2007 and lived in it for a year. I moved into my girlfriend's house and let mine out. I receive £650 in rental payments (there isn't an agent, I manage it myself with a contract between ourselves). I pay out in rent to my girlfriend £450. Since I've let the property, I pay the mortgage company between £450 and £400. All payments are direct debits to related banks. So from a net point of view I'm down £200. Therefore I thought I didn't have to pay/disclosure any tax. Am I correct in this or not? If so what kind of tax do I pay.

I'm thinking of selling my house in the next couple of months. Do I have to pay some kind of capital gains tax? I bought it for £120k and it may sell at around £140k. I put £15-20k into the house in 2007 in renovations so can I off set that against a tax if I owe any?

If my tenant moved out and the house didn't sell and becomes empty would I still have to pay capital gains tax if I eventually got a buyer?

Any input would be gratefully received as I find the whole thing very confusing. I didn't feel I have gained anything from the whole experience but will the tax man see it differently?

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This is a bit of a saga.

Basically you do have to declare any income not earnt - ie the rent of 650 on your house - let HMRC decide what you owe - forget about rent paid to girlfriend that is lost.

Unlikely you will pay Capital Gains as you will probably buy somewhere else in the next 2 years. Capital gains tax is really for slightly bigger deals than you seem to be experiencing.


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I think your confusion is in trying to combine several separate tax issues into one. As Mortitia says, tell HMRC everything they ask on the Self-Assessment Return including Rented Property page (and also CGT page if you've sold), and let them work it out for you. You may be pleasantly surprised!

It's easier to consider each issue separately,

1) The property you rent out.

Your rental income of £650. You declare this under Rented Property Income (gross). You declare your Mortgage interest element (but not the repayment element) of your mortgage cost on this property as part of your Expenses to subtract for a Net Income from Property. Maintenance during rental and Insurance costs can also be included in Expenses for this.

2) The rent you pay to live in your girlfriend's house is part of your own living expense, and nothing to do with your rented property expenses. As far as I know it wouldn't normally qualify for any tax relief or allowance.

3) Capital Gains tax is completely separate and would really need to be checked with HMRC when you actually sell. As Mortitia says, it's probably unlikely to affect you. As CGT is not liable on your own home I think it would be effective on it's value only from when you moved out and started renting it. If it became empty perhaps you should move back! You would need to consult on this.

Google for the relevant HMRC guidance notes and other notes on the web. They are usually very clear. It's what I do, as I'm no expert!

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