hi i was wondering if anyone can give me some advice

i am renting out a property and the rent from that property pays the mortgage of that house and also of the house that i live in as i have been made redundant, both mortgages are interest only and the house i live in has a huge mortgage compared to the one i rent out. i dont make a profit and i am lucky to break even. i need to declare my rental income and i have been told that the mortgages make no difference my only allowable deductible expense is wear and tear on the rental house and any expenses for that house.

i have made an appointment with an accountant meanwhile any advice will be greatly appreciated.

Hi there,

Renting out a property is just like any other business; you are liable for tax on any profit you make. The mortgage does not come into the equation as this is what you pay to buy the property. Its value will be yours, assuming you keep up the payments on it and in due course it will have a higher value than that which you paid or are paying for it. Trust me, property values will rise again, they always do, it just takes time.

What you need to do is run this as a business, keep a simple account book, which shows the date of monies in from rent and monies out in expenditure for maintenance, advertising, alterations etc.

If you deduct monies out from monies in, the difference is profit and this is what you will pay tax on. If you are currently unemployed you may be able to claim your tax free allowance against the profit, meaning you may not actually have a profit to pay tax on. Only the figures will show this, but be aware, if you are claiming any benefits, these add to your income for tax purposes.

Please make sure the accountant you choose is one you can trust, better to have one recommended to you than take pot luck in the yellow pages. They should point out without you having to enquire, all the items you can claim against tax. If they don’t, beware, at the end of the day, the more work the accountant does the more it costs you. Having said that, your accountancy fees are off-settable against your profit!

Best of luck

Siren123

The mortgage on the property you are renting out does come into the equation, as far as the Interest portion being an allowable expense along with other expenses like maintenance, insurance, any utilities you pay, advertising for tenants, accountancy fees, phone calls, petrol as long as they relate to that rental property and you have bills to back them up.

When looking for an Accountant, search for one who already looks after these types of business and try to prepare your expenses and income receipts a little before handing them over. It may be worth asking your accountant if you can do something about the mortgages, I read an article recently that you can now get a fiurther advance on your BTL mortgage and still claim the the increased interest as an allowable expenses but check this out first. It also depends on your lender of course.

One source of good free advice from accountants and property specialists is taxationweb.co.uk which is a public forum and tax news site, file any questions under "income tax" for rental income questions and later if you come to sell the property there is also a section for "capital gains tax" queries.