Tax and renting out your house

[d000hg]

We own a house, which we are about to let out. We live in a rented property ourselves.

I understand that rental income is taxable on SATR? But what about the money we have to spend getting it ready to let - can this be written off or is it treated as an investment in the value of the property when we come to sell?

And of course, when we do sell what happens to any profit based on increased value since we bought? Does the fact we don't own any other property make any difference to capital gains tax?

Asked in general because while it's a tax question, I don't think it's really contracting related.

[Ardesco]

You pay tax on the profit.

If your mortgage is interest only your can claim the whole mortgage as an expense. If you have a repayment mortgage you can only claim the interest component as an expense.

I would suggest having an interest only mortgage just for ease of record keeping and use the money that would have been the repayment portion to pay off other debts.

You can claim works done on the property as an expense and if you supply it furnished a percentage of rent if tax exempt as it is assumed you will use that for upkeep of the property (I think it was 15%, not sure off the top of my head though).

To be furnished you need to supply white goods, bed and wardrobe in each room and a sofa and a dining table (although this can be open to interpretation depending on who you talk to). The downside to a furnished property is that you have the joy of paying the council more tax if it is vacant and you have to pick up the council tax bill (Thieving bastards, how does having a bed in a vacant property make it any less vacant?).

Not sold one yet so don't know anything about the CGT side of selling it.

[Gonzo]

Not sold one yet so don't know anything about the CGT side of selling it.

My knowledge is probably out of date so you should check with a professional but my mate sold one of his houses a few years ago after living in it and then renting it out and the position was

• There is no CGT to pay on any gain made selling your primary residence
• If you move out of your primary residence there is a three year window where you can still sell it and claim it as a sale of your primary residence and therefore not liable for CGT, the rule is more complicated than that though I think

I suspect that the HMRC website would be a useful source of info on this.


EDIT: Obviously the rules are different if you are an MP.

[moorfield]

You can claim works done on the property as an expense

Be careful with this. You can claim repairs (eg. fixing a leak in a bathroom) but not improvements (eg. replacing the bathroom with new).

As usual, your number bod can advise...

[northernladuk]

My knowledge is probably out of date so you should check with a professional but my mate sold one of his houses a few years ago after living in it and then renting it out and the position was

• There is no CGT to pay on any gain made selling your primary residence
• If you move out of your primary residence there is a three year window where you can still sell it and claim it as a sale of your primary residence and therefore not liable for CGT, the rule is more complicated than that though I think

I suspect that the HMRC website would be a useful source of info on this.


EDIT: Obviously the rules are different if you are an MP.

The days of having some bills sent to your owned house and having them re-directed to you in your rented to try and prove it is your primary resident is over. You have to go through a raft of questions and stuff to prove it is your primary residence so don't even try that one.

The CGT is on a sliding scale the longer you have it the less you actually pay. Something to do with the value of money changing. What was £10 ten years ago is £100 now etc etc.

[threaded]

A whole load of this stuff is totally dependant on the type of renter, and the area the house is in...

For example if you get asylum seekers in then you can claim a whole new bathroom from the local council, but not have to pay that portion of the house value increase when you sell it, but it is a minefield, depending on postcodes etc. etc..

Generally even a good accountant won't know all rules, because there're so many and they change from council to council. So they need you to prompt them to find the correct ones. To find that, I'd suggest you talk to someone from that areas chamber of commerce and find the appropriate group. People who rent out HIMOs generally know a lot of the rules for whole houses too.

[Gonzo]

The CGT is on a sliding scale the longer you have it the less you actually pay. Something to do with the value of money changing. What was £10 ten years ago is £100 now etc etc.

I am not up to date with the current position but I thought that indexation allowance was removed with the CGT changes that were made a couple of budgets ago.

You'll pay tax on that £90 gain now. Ouch.

[b0redom]

Be careful with this. You can claim repairs (eg. fixing a leak in a bathroom) but not improvements (eg. replacing the bathroom with new).

As usual, your number bod can advise...

Interesting, so what if the double glazing is busted. Can you replace that?

[d000hg]

Well for costs like decoration those would in this case be part of doing up the house whether let or sell, so not bothered there.

But to get a gas safety certificate we had to spend £3k on getting a brand new boiler which wipes out profit for 6-12 months and obviously I'd rather not pay tax on income when we're not in profit.

This business of claiming costs as expenses (thanks for the tip on mortgage interest), that's done letting out in a standard fashion... I don't need to run a Ltd to do this?

My accountant does my SATR for me, but I won't know how happy they'd be with this extra complexity. They're one of the specialist contractor accountancy firms, anyone got any experience here with getting help on at least the basics as far as accounting for income/expenses on the SATR?

[b0redom]

My accountant charges £25/BTL property, but I only have one. I keep everything from the B2L separate, incomings, outgoings etc, so it's easy to manage for both me and the accountant.