helenmarshall Posted September 19, 2010 Report Share Posted September 19, 2010 I am about to get a remortage approved from my residential mortgage to a buy to let mortgage as I no longer wish to live in my house. Question 1: Capital gains tax. Is it true I will not have to pay this if I sell before the next three years? Question 2: I currently have lodgers. I am considering keeping them and being a part time live in landlord. What will the tax implications be? Am I better off on the rent a room scheme or the residential letting scheme? Does the rent a room scheme have any allowable expenses? Can I have several lodgers? I wonder what the most financially and most practical solution is. Question 3: If the rent is more than £25000 a year I've read somewhere I should get a different kind of tenancy agreement, is this a problem? Question 4: Under the residential lettings scheme I have read I can pay someone else for allowable expenses such as the gardening, repairs, collecting rent and admin. Can I pay my mother for this and claim it? It seems the safest option as I don't want to go through a letting agent. Many Thanks! for an answer to any question )) Link to comment Share on other sites More sharing options...
helenmarshall Posted September 19, 2010 Author Report Share Posted September 19, 2010 I should rephrase that ideally I don't want to live full time in the property as I am living with a partner for a while and woudl just akeep a room in the house technically that could make me a live in landlord, but if it causes problems can vacate property completely..also I'd only pay my mum for the admin time she puts in, is that allowable? I am about to get a remortage approved from my residential mortgage to a buy to let mortgage as I no longer wish to live in my house. Question 1: Capital gains tax. Is it true I will not have to pay this if I sell before the next three years? Question 2: I currently have lodgers. I am considering keeping them and being a part time live in landlord. What will the tax implications be? Am I better off on the rent a room scheme or the residential letting scheme? Does the rent a room scheme have any allowable expenses? Can I have several lodgers? I wonder what the most financially and most practical solution is. Question 3: If the rent is more than £25000 a year I've read somewhere I should get a different kind of tenancy agreement, is this a problem? Question 4: Under the residential lettings scheme I have read I can pay someone else for allowable expenses such as the gardening, repairs, collecting rent and admin. Can I pay my mother for this and claim it? It seems the safest option as I don't want to go through a letting agent. Many Thanks! for an answer to any question )) Link to comment Share on other sites More sharing options...
Melboy Posted September 19, 2010 Report Share Posted September 19, 2010 I can answer Q4 If you pay any relative or person and that person receives money to undertake any services for you then that person must declare the income for tax purposes as earned income to HMRC. Mortitia will probably be able to answer your other questions for you I think. Mel. Link to comment Share on other sites More sharing options...
Mortitia Posted September 19, 2010 Report Share Posted September 19, 2010 Hi there, Q1 You may be liable for capital gains if you don't buy another property with the money from the sale of this one within 3 years. Consult an accountant or google - terms of capital gains tax for more info. Q2 You are allowed to rent out 1 room in your house to a lodger tax free. If you are renting out multiple rooms (and you don't say how many) you may come under an HMO (house of multiple occupation) so best ask your local council about that one or look at their housing website. Most councils detail this stuff online. Any rental income other than the one room of your own home is unearned income and liable for tax. Q3 Are you really going to take more than 25K in rent? Yes you do need a different letting agreement - consult a solicitor. Link to comment Share on other sites More sharing options...
helenmarshall Posted September 19, 2010 Author Report Share Posted September 19, 2010 Hi Melboy, many thanks. Yes my mum would declare it. I just want to know if I pay her to do the management, collection of rent, admin and books that it is allowable and I can claim it as landlords allowable expenses. Many thanks Link to comment Share on other sites More sharing options...
helenmarshall Posted September 19, 2010 Author Report Share Posted September 19, 2010 Thanks so much Mortitia Q1, I have an accountant, I'll ask him, I do expect to sell the house within 3 years so as you say it might exampt me from CGT. It is my main residence. I own no other property Q2 There will be no more than 3 lodgers an with me means 4 in total, However its more liekly I'll do a joint tenancy agreement. What is the maximum number allowed? 4? I don't want an HMO. Q3 The rent will be £2400 a month, meaning yes more than £25,000 a year. It is a house in LOndon. OR should I calculate rent received after all allowable expenses which in that case it will be £1200 a month.Which applies? Thanks again for your careful consideration of my questions! Hi there, Q1 You may be liable for capital gains if you don't buy another property with the money from the sale of this one within 3 years. Consult an accountant or google - terms of capital gains tax for more info. Q2 You are allowed to rent out 1 room in your house to a lodger tax free. If you are renting out multiple rooms (and you don't say how many) you may come under an HMO (house of multiple occupation) so best ask your local council about that one or look at their housing website. Most councils detail this stuff online. Any rental income other than the one room of your own home is unearned income and liable for tax. Q3 Are you really going to take more than 25K in rent? Yes you do need a different letting agreement - consult a solicitor. Link to comment Share on other sites More sharing options...
Mortitia Posted September 20, 2010 Report Share Posted September 20, 2010 Hi again, You can put 4 persons on an AST. Since you expect to take more than £25K / annum in rent you should start out with the right agreement. If I was taking that kind of money on one property I would definitely take legal advice but make sure it if from a specialist landlord and tenant solicitor not just the first one you come to on the hight street. Good luck with that, Mortitia Link to comment Share on other sites More sharing options...
helenmarshall Posted September 21, 2010 Author Report Share Posted September 21, 2010 Hi Mortitia I just found this information. An AST is not suitable for some circumstances where it should NOT be used: § If the property receives more than 25k per year in rent (This will, however, change to 100k from October 2010) Are you able to help me then with whether I can pay my mum to be the agent please and calculate allowable expenses from this? Hi again, You can put 4 persons on an AST. Since you expect to take more than £25K / annum in rent you should start out with the right agreement. If I was taking that kind of money on one property I would definitely take legal advice but make sure it if from a specialist landlord and tenant solicitor not just the first one you come to on the hight street. Good luck with that, Mortitia Link to comment Share on other sites More sharing options...
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