Newbie introduction

[jon0881]

Hi,

I dont have any specific questions as i know how frustrating it must be for basic questions that someone should have researched into beforehand. However, if anyone would like to comment or make suggestions I would welcome them of course.

Basically we tried to sell our property to trade up to a bigger place. We bought back in 2001 when times were easy so have had the benefit of a small mortgage for years. Its been an anxious decision to trade this in for a ‘grown-up’ mortgage or mortgages I should say. We tried selling for a few months but there are not a lot of buyers out there and we found a place we liked. We decided to remortgage our place and buy the new place, obviously changing the old place to a buy to let. I'm a naturally cautious and anxious person so it’s a big change but I think we have done the right thing. To get both properties we had to get 75% mortgages on both but the rental yield is 8% (minus equity or 6% including). The rental market is strong in our area and there are not many to choose from in a 1 mile radius.

Having bought and started to read David Lawences book its helped understand some of the aspects that I hadn’t already seen on the internet. I had considered paying my tax on rental income through my PAYE until I read a useful post on here about how it actually charged so regardless of the net profit from the rental being below £2500 its still worth doing a tax return. I think I understand quite a lot of what can and cannot be claimed against your rental income but I am still tempted to employ an accountant for the first and the last year of the letting to ensure I am not overpaying. One nice little gem I did find though was being able to claim £3 per week for having a home office. I also have to wash my own uniform for work so that’s going on there too! I will be splitting the rental income between me and my wife too to reduce the liability.

Right now we are still in the process of purchase so we are weighing up which agent to use and what level of service. It doesn’t look like our lender wants a tenant to be set before the exchange but we plan to have one set before then anyway. I just hope they look after our ‘home’ and especially my kitchen. I'm sure I will regret it but we are leaving behind solid hardwood worktops that need looking after and a Smeg cooker.

Actually I do have a question, what do people usually do if they plan to sell the property? In my mind I would hope that a good tenant would like there whilst it was for sale and leave once a sale was going through with a bit of a cash incentive for being so flexible.

Best wishes

Jon

[Richlist]

I get the impression that you are viewing property rentals through rose tinted glasses.

I had considered paying my tax on rental income through my PAYE until I read a useful post on here about how it actually charged so regardless of the net profit from the rental being below £2500 its still worth doing a tax return.

I don't understand this. If your gross income is below £15K pa you only need to provide HMRC with 3 figures......income, expenditure & profit or loss. You do this by through self assessment filling in the land & property pages.

One nice little gem I did find though was being able to claim £3 per week for having a home office.

I think you may have misunderstood.......although obviously I havent read the particular passage in that book. I believe HMRC generally accept a claim for that amount.....it doesn't mean its what YOU should claim. You should be maximising any claim for using a part of your home. Generally there are a number of ways to calculate the claim. Add up the number of rooms in your home that can be used to work on your property admin'......bedrooms + lounge + dining room + study .....not halls, landings, bathrooms, utility rooms, games rooms, gyms, pool rooms etc. Add up the total cost of running your home......mortgage, insurance, utilities, council tax, maintenance etc and divide by the number of rooms. Apply a factor eg 50% to the result to allow for any private use......and thats what you claim.

I also have to wash my own uniform for work so that's going on there too!

I don't know anyone who wears a uniform to rent out property........are you joking ????

I will be splitting the rental income between me and my wife too to reduce the liability

You can do this provided the property & mortgage is in joint names otherwise you will need to make changes before you can both claim.

I just hope they look after our 'home' and especially my kitchen. I'm sure I will regret it but we are leaving behind solid hardwood worktops that need looking after and a Smeg cooker.

NOT RECOMMENDED

[jon0881]

Thanks for the reply Rich.

With regards to the kitchen, we dont have a choice now, it is what it is. Hopefully we will attract a decent tenant on the back of the finish. Let me clarify my other points;

PAYE vs tax return - Ive read (not in the book) that if the profit from another income (rental or shares etc) is less than £2500 you can basically add this to your PAYE from your day job by completing the P810 (http://www.upad.co.uk/blog/2011/02/tax-tips-for-new-landlords/).

Home Office - Maybe i have misunderstood (this is what i read on money saving expert i think), your method seems much more attractive. The new house will have an office that is used for the dayjob occasionally. So are you saying even with only 1 rented property i can claim for 50% of the running costs of my main residence for the rooms i might do administration in(excluding capital payments on the main residence mortgage of course)?? If yes, then would that also apply to a percentage of the maintenance/upkeep of the main residence?

Uniform - no of course i will not have a uniform for my 1 letting but my day job requires i wear one at my main office. It is possible to claim an allowance for this, i think its about £60 a year. In my eyes my tax return is not solely related to the rental business so i should be able to include it?

[Richlist]

PAYE vs tax return - Ive read (not in the book) that if the profit from another income (rental or shares etc) is less than £2500 you can basically add this to your PAYE from your day job by completing the P810 (http://www.upad.co.u...-new-landlords/).

Its a long time since I earned less than £2.5K from property so I've learned something today, thanks.

Home Office - Maybe i have misunderstood (this is what i read on money saving expert i think), your method seems much more attractive. The new house will have an office that is used for the dayjob occasionally.

You don't want to use/ allocate/ claim for just 1 specific room in your house or you could be liable for CGT when you sell your main home.....your accountant will better advise you on the details.

So are you saying even with only 1 rented property i can claim for 50% of the running costs of my main residence for the rooms i might do administration in(excluding capital payments on the main residence mortgage of course)?? If yes, then would that also apply to a percentage of the maintenance/upkeep of the main residence?

No, no & no I'm not saying any of that. Read my post again.

Uniform - no of course i will not have a uniform for my 1 letting but my day job requires i wear one at my main office. It is possible to claim an allowance for this, i think its about £60 a year. In my eyes my tax return is not solely related to the rental business so i should be able to include it?

No you can't include it.......You claim for a uniform in your day job because you wear a uniform. As you don't wear a uniform to manage your property rental you can't claim for the cost of a uniform. Simple concept really.

[Richlist]

duplicate......can't delete

[jon0881]

Nope sorry I've retread your post and I don't understand what you mean. As I understand it you can only claim a % of the running costs of your residence if you are based from home or run a business from your home. In that case you need to justify the % claimed for the time or cost whilst on business. In that case I couldn't justify much time spent managing one letting.

Have I misunderstood?