Offsetting rental income against rent paid Offsetting rental income against rent paid
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  1. #1

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    Default Offsetting rental income against rent paid

    A friend of mine is thinking of buying a 1-bed flat in Swindon and using the income to put towards the rent for a 2-bed flat in Maidenhead.

    As the potential Swindon flat is his first home purchase, is he able to offset the rental income against the Maidenhead flat, for tax purposes?

    If not (as I suspect) are there any good tax efficient methods if partaking in the above?

    Reason for doing this is simply that he cannot afford to rent in Maidenhead (where he's from) but he he can purchase in Swindon, and this allow him to get on the property ladder.

    Also, they are a couple so potentially can use both their personal allowances for rent received. Are there any rent-specific allowances?

    Anything to watch out for or tips on the above scenario.


    thanks in advance

  2. #2

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    What income is he going to get from his flat in Swindon? It can't be a lot if he's got it mortgaged will it?
    What's his plan for the periods that it's empty?
    Is it in both their names so the split the income between both their tax limits?

    Seems very risky to me but not seeing the numbers it's hard to say.

    Can you not buy your accountant some beers and ask them if they can give you some advice?

    What makes you think you can offset income against paying to live? Sounds like he's clutching at straws.

    How's he buying the flat? Not sure it's classed as a home when it's a BTL will it? He'll have to get a proper mortgage and not a residential one.
    Last edited by northernladuk; 15th April 2019 at 22:44.
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  3. #3

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    Default

    Quote Originally Posted by ContractorBanking View Post
    As the potential Swindon flat is his first home purchase, is he able to offset the rental income against the Maidenhead flat, for tax purposes?

    If not (as I suspect) are there any good tax efficient methods if partaking in the above?
    Basically, No and, No.

    If personally bought, the mortgage is not tax deductible now; both the capital repayment and the interest parts. Repairs and agency costs are deductible. But the payments for wherever else you live are not deductible.

    One option is to buy the flat in Swindon via his company (If indeed he IS a contractor (but I suspect he is not if he is having money issues to live in Maidenhead)). But, the mortgage lender may raise issues with SIC codes if he doesn't want dual accounts to pay for. This way though, the interest element IS tax deductible.

    'Being able to buy in Swindon while not being able to rent in Maidenhead' is interesting though. What are the sums involved?

  4. #4

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    Quote Originally Posted by ContractorBanking View Post
    Anything to watch out for or tips on the above scenario.
    Tip 1) Don't buy a rental property in a town where the largest employer is going to close their factory.
    If you must, then wait till the housing market dips.

    Tip 2) Don't buy a rental property when we don't know what B**x*t will do, and when we might have a Korbyn government before the next budget.

    That's all I got.
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