Quick tax question btl mortgage

[lynall]

We have another house which we rent out and as the mortgage has now come down we are making a profit which in my eyes is bad news, profit = tax owed

Its need some building work, ie patio lifting slabs sticking up side path same condition and i reckon we should get it done as we could then offset the cost against the upcoming tax bill, pretty certain this counts as maintainance and not improvements so is allowable.

Wife who does the tax returns/ forms etc doesnt agree with me.

Whos right?

I was told by an accountant years ago never make a profit ever


Lynall

 

[wemorgan]

I think you can spend 10% of the rental on wear and tear items.

I would agree that relaying a patio is wear and tear.

 

[kth286]

I think there is a difference between making a profit, and showing it on paper.

For example, if you dont make profit how can your business grow.

Every business needs to grow - stagnation is to die.

 

[renault12ts]

Reduce your rent. That way you'll have no profit and thus no tax to pay On the other hand take the net profit and spend it , you are now ahead of where you were before interest rates dropped. If you complain about tax its because you are doing something right and making a profit.

 

[Chattonmill]

I always said to My brothers Girlfriend who did our accounts that I would love to be paying the Tax man a Million pounds a year......she did not understand that(She doesn't work for us any more)

 

[crammy69]

We have another house which we rent out and as the mortgage has now come down we are making a profit which in my eyes is bad news, profit = tax owed

Its need some building work, ie patio lifting slabs sticking up side path same condition and i reckon we should get it done as we could then offset the cost against the upcoming tax bill, pretty certain this counts as maintainance and not improvements so is allowable.

Wife who does the tax returns/ forms etc doesnt agree with me.

Whos right?

I was told by an accountant years ago never make a profit ever


Lynall

You have two options when showing your rental income accounst each year, either to take the 10% depreciation (on furnished properties) each month or actual expenses as they occur. Not both.

If you have already been claiming the 10% each month already, then you cant just change over. What you need to be carefull of is what you spend it on. If you replace an exisitng fridge freezer thats ok, if you do a loft conversion, thats not!. Fixing an 'unsafe' passage should be Ok, but betterment of the property is a grey area.

If you have a letting agent they should ( if they know their stuff) be able to give you the latest info on these sort of things.

Also, sometimes its nice to pay a little bit of tax, its often easier than trying to wriggle out of it.

All in my humble opinion of course, if Im wrong, you cant sue me! Im just small time landlord!. A good place to ask these sort of questions is on the propoerty investment boards on Motley Fool.co.uk - some great people there.

Cheers
Simon

 

[PXW]

Charities are struggling right now. if you're in the unfortunate position of having a bit of extra taxable income and nothing better to do with it than reset some pavers, then why not give the extra to charity under Gift Aid - same tax effect

 

[lynall]

Thanks for all the replies spoke to a fella i know whos got 16 houses so hes much more up to date than me and hes pretty certain as its not betterment and is just a repair especially as could be classed as health and safety i should be fine.

Nice to make a profit, as for last 3 years its either just broke even or cost us, but we bought it for the long term and it was a very good price so okay so far.

Would like some more, need big balls though

Houses are like food and water people are always going to need them.



Lynall

 

[lynall]

You have two options when showing your rental income accounst each year, either to take the 10% depreciation (on furnished properties) each month or actual expenses as they occur. Not both.

If you have already been claiming the 10% each month already, then you cant just change over. What you need to be carefull of is what you spend it on. If you replace an exisitng fridge freezer thats ok, if you do a loft conversion, thats not!. Fixing an 'unsafe' passage should be Ok, but betterment of the property is a grey area.

If you have a letting agent they should ( if they know their stuff) be able to give you the latest info on these sort of things.

Also, sometimes its nice to pay a little bit of tax, its often easier than trying to wriggle out of it.

All in my humble opinion of course, if Im wrong, you cant sue me! Im just small time landlord!. A good place to ask these sort of questions is on the propoerty investment boards on Motley Fool.co.uk - some great people there.

Cheers
Simon

Simon good advice i never thought of them i shall ring them tomorrow.



Lynall

 

[crammy69]

Would like some more, need big balls though

Houses are like food and water people are always going to need them.

Lynall

Have to agree, seen some very tempting deals around at auctions in the last 6 months. However, dont feel there is any immediate need to rush, would rather pay 10% higher than the bottom and know it has bottomed, which I dont feel it has.

 

[renault12ts]

Have to agree, seen some very tempting deals around at auctions in the last 6 months. However, dont feel there is any immediate need to rush, would rather pay 10% higher than the bottom and know it has bottomed, which I dont feel it has.

It has bottomed. BUY BUY BUY.

 

[alanf]

I agree ive been buying and intend to get more

Alan

 

[wemorgan]

If anyone is looking to invest spare cash then it's also worth investigating the stock market. The FTSE has risen strongly in the past 6 months.

 

[renault12ts]

If anyone is looking to invest spare cash then it's also worth investigating the stock market. The FTSE has risen strongly in the past 6 months.

It might have been better to invest on the 9th March when it hit its lowest.

 

[wemorgan]

It might have been better to invest on the 9th March when it hit its lowest.

A friend of a friend remortgaged their house and put the lot on Barcalay shares when they were 50p, now they are 362p.

My kahooners are not big enough for that kind of gambling.

But I still think there are good investments to be had and if invested wisely, less risky than the single sector of private rentals. IMHO

 

[Dryce]

If anyone is looking to invest spare cash then it's also worth investigating the stock market. The FTSE has risen strongly in the past 6 months.

It's still quite volatile. And that's not a good sign.

Interest rates are historically low which means the market doesn't have to perform as well in terms of growth and dividends to draw in money. If interest rates go up then the market will have to perform better.

There is still bad news to come. Unemployment is still rising. The government still has huge income and spending problems.

So anybody putting their hard earned into the market right now needs to do so with a really cynical perspective.

 

[Satch]

It has bottomed. BUY BUY BUY.

Off you go.

"Detached Dwellinghouse that may offer a potential development opportunity"

Countrywide Property Auctions

There are opportunities but the bottom in the overhyped BTL market is still some way off.

 

[stevesey]

If anyone is looking to invest spare cash then it's also worth investigating the stock market. The FTSE has risen strongly in the past 6 months.

Don't forget the value of your investment may plummet as well as fall.

I've been making some pocket money on the market since last Nov. Not enough balls to make any serious money, but doubled my small pot without much effort.

 

[saorbust]

Further suggestion re the BTL mortgage - overpay it. Some companies allow you to do it, some don't. We are in a similar situation as you - trying to keep proft to a minimum, and preferably only just make a loss. We look at the end of the year, accountant does his bit, gives us the number, we overpay the mortgage co, and boom, no profit.

 

[crockers]

It might have been better to invest on the 9th March when it hit its lowest.

As they say "Hindsight is a science".......Ever £1 in Barclays would now be worth £8.....