Renting a Property

M3 SHAM

Active Member
Joined
Jun 24, 2011
Messages
96
Car
2005 C180K Avantgarde SE (Sports Pack)
Hi Guys,

I am considering renting out my house for a period of time and was wondering what I would have to do to stay 'above board'

I have contacted my Mortgage company and they have provided me with written authorisation to the rent the property should i wish to (had to pay £60 for this as its currently on a residential mortgage)

I am aware I will need to get a landlord gas safe certificate for the boiler and have renting building insurance.

Is anyone aware of any tax implications? Do I have to register this as a business or something? As it stands it looks like the rent per month will be equal to the mortgage payment so in essence there will be no profit made?

Any help greatly appreciated.
 

renault12ts

MB Club Veteran
Joined
Mar 5, 2009
Messages
16,335
Car
2005 W215 CL500.
Is it a business? You can't offset your normal income against your mortgage payments, so there is no reason why the rent received will be off set against the mortgage payments. So, declare the rent.
 
OP
OP
M

M3 SHAM

Active Member
Joined
Jun 24, 2011
Messages
96
Car
2005 C180K Avantgarde SE (Sports Pack)
Is it a business? You can't offset your normal income against your mortgage payments, so there is no reason why the rent received will be off set against the mortgage payments. So, declare the rent.

It is not a business, it is my residential home which I will be renting out potentially for 12 months whilst working abroad.

I understand your point but I have heard this does not apply in this case and there are different rules when it comes to renting property. Hopefully I will get some more feedback.
 

EDZ649

MB Enthusiast
Joined
Jan 25, 2009
Messages
3,998
Location
1066 Country
Car
R129 SL600 V12
If you take a deposit, which I'm sure you will, you have to place it in a deposit protection scheme in case of dispute when the tenant leaves the property.

As for insurance you only need to cover the building itself, the contents are the responsibility of the tenant.

Take lots of detailed photo's before you rent it.....
 

E CLASS

Active Member
Joined
Oct 16, 2008
Messages
411
1. Are you going to manage it yourself? By that I mean draw up all the paperwork and attend to anything that needs doing. When you are abroad this could prove tricky. Leaky tap, dishwasher packs in etc...

2. Or get a company to manage it for you and take 15% (usually) of the rental payments?

3. You'll need to let furnished I imagine - so get cover for your contents also. Direct Line offer landlord insurance.

4. If you manage yourself ensure all the paperwork is correct and above board - could prove your undoing should anything happen.

5. Vet your tenants.

6. Do a scrupulous inventory of everything in the house right down to the light shades and teaspoons.

7. You may need to register as a landlord with the local authority - check this.

8. Fot smoke alarms everywhere.

9. Don't cut corners.

10. Rent to professionals only...


You'll need to complete a tax return stating rental income versus mortgage payments.

Take a deposit usually 1.5 times monthly rental payment.
 

martin_a

Active Member
Joined
Mar 31, 2010
Messages
550
Location
Scotland
Car
C200
Paperwork might well be Gas Safe as you've mentioned, plus electrical checks on everything, plus a home efficiency report to say how much energy is expected to be used.

Check out www.landlordzone.co.uk for more advice.

m.
 

davidjpowell

MB Enthusiast
Joined
Nov 8, 2007
Messages
4,903
Location
Doncaster
Car
Range Rover Vogue, Volvo XC60 and crappy Pug 307
You can only offset mortgage interest against tax, not capital repayments. You can offset an amount towards cost of replacing fixtures and fittings etc.

If a letting agent is sending rent to a non Uk tax payer they must deduct tax and send hmrc.

Good inventory required at start of tenancy if you are to have a leg to stand on in case of damage
 

Chrishazle

MB Enthusiast
Joined
Nov 13, 2008
Messages
4,092
Location
Nr Ashford, Kent
Car
2008 S204 C220CDI Elegance Estate Auto, 2008 R171 facelift SLK280 Auto.
For the rental agreement, there is ARLA - I think that's Association of Rental and Leasing Agents, who have a very good standard agreement that reputable rental agencies use. My daughter had lots of problems renting through non-ARLA agents when a student in Bath, whereas we had no problem renting through an ARLA agent using the standard ARLA contract with a few minor changes when we rented for a year (unfurnished).
 

wemorgan

MB Enthusiast
Joined
Apr 5, 2008
Messages
8,106
Car
A205 C220d
If you're abroad I can recommend paying for a full managed estate agent. Their fees are ~10%, which can also be used to offset against the income from the rental.

Unfurnished is less hassle and depending on size/location wont make much difference to the rental anyway.
 
OP
OP
M

M3 SHAM

Active Member
Joined
Jun 24, 2011
Messages
96
Car
2005 C180K Avantgarde SE (Sports Pack)
If I go ahead with this I will be renting to a family friend who himself has a partner and 2 young children that will be living in the property. I will be managing this myself so will not be using a property management company.

I just want to be fully aware of my leagal responsabilities in terms of tax, I heard from someone else that if rent is equal to the mortgage then you dont need to pay any tax? Not sure if this is true?
 

A-AvantGarde

MB Enthusiast
Joined
Nov 11, 2003
Messages
4,685
Location
South Bucks
Car
2016 BMW F86 X6 M, 2016 BMW F30 320d, 2001 Mercedes C320 Elegance
Lots of good advice above.

I've previously worked in Lettings (during a gap year at Uni):

If you're going to be abroad, I'd seriously recommend going for a managed let, i.e. agent finds tenants, vets tenant, draws up contract, collects rent and then takes calls from tenants about any issues with the property.

If you have contacts here (general builder / DIY handyman) then that could suffice but do you really want to get a call in the middle of the night about a leaking shower?

Also if leaving the property furnished, all of the soft furnishings (e.g. sofas, beds etc have to comply with fire regulations - the labels need to be present). All new (from approx 1997 I think) furniture (except mattresses and bed bases) must carry a permanent label in accordance with the regulations, check your sofa and you should find a fire safety label.

If the property is a flat you may most likely need permission from the leasholder / managing agents too.
 

A-AvantGarde

MB Enthusiast
Joined
Nov 11, 2003
Messages
4,685
Location
South Bucks
Car
2016 BMW F86 X6 M, 2016 BMW F30 320d, 2001 Mercedes C320 Elegance
If I go ahead with this I will be renting to a family friend who himself has a partner and 2 young children that will be living in the property. I will be managing this myself so will not be using a property management company.

I just want to be fully aware of my leagal responsabilities in terms of tax, I heard from someone else that if rent is equal to the mortgage then you dont need to pay any tax? Not sure if this is true?

I would be wary about letting to a family friend unless you know them really well. I'd like to keep busines and family life separate.

As for the tax implications check this:

Tax on rental income - an overview : Directgov - Money, tax and benefits

Essentially you shouldn't have any major issues with the situation you've described.

The most important thing is that you have the mortgage company approval. It's also most likley they will increase your mortgage rate by at least 1%.
 

HR17

Active Member
Joined
Nov 27, 2008
Messages
636
Location
West Mids
Car
A Merc.
I have property I let. Top tip for an easy life is to have a good agent do it on your behalf, and negotiate a fee down from their usual. You might be able to get away with <10% of the gross rent if lucky. It’s worth every penny when something goes wrong - blocked drain, dishwasher leaks, gas needs testing, boiler dies etc. (And frozen pipe work following last winter!)

Also get buildings and contents insurance - both very cheap when combined.

When it comes to tax, I declare everything on my return, and claim interest, agency fees, insurance and all the maintenance against the rental income. It’s very easy if you file on line.

Tenant wise, my agent gave me carte blanche to decide who I want. I opt for professionals only with references and deposits(which the agent looks after). Also non smokers, no cat/dog owners, no benefit claimants, no asylum seekers etc.

I've never had any problems with tenants, and any maintenance, breakages or repairs have been organised by my agent. My contracts also state that tenants are responsible for making good any paintwork/damage through wear and tear, carpets are shampooed when they leave, and that gardens are maintained and lawns cut etc.

I sit back and bank the cash at the end of the month, and hold it in a savings account til the tax man wants his cut, and I keep the rest.
 

Harrythedog

MB Enthusiast
SUPPORTER
Joined
May 8, 2011
Messages
2,286
Location
Tynemouth
Car
GLC 250 Sport Premium+
As someone said you can only claim against the interest on the mortgage repayment not the whole amount. Any profit between rental income and interest repayment is taxable. Get an accountant ( cost about £100-£150) to do your tax return and that'll keep you sweet with HMRC. the most important thing is to get a signed shortterm tenancy agreement with a specified termination date otherwise tenants may be classed as "sitting" and you'll never shift them (unless they've changed the law)
 

HR17

Active Member
Joined
Nov 27, 2008
Messages
636
Location
West Mids
Car
A Merc.
As someone said you can only claim against the interest on the mortgage repayment not the whole amount. Any profit between rental income and interest repayment is taxable. Get an accountant ( cost about £100-£150) to do your tax return and that'll keep you sweet with HMRC. the most important thing is to get a signed shortterm tenancy agreement with a specified termination date otherwise tenants may be classed as "sitting" and you'll never shift them (unless they've changed the law)

If you do your return on line, there's an option to add let property and record the outgoings such as interest, agency fees and maintenance etc against the rental income. It works out the tax payable on the profit for you, and is very easy to to. Takes only a few seconds and is free.
 

HR17

Active Member
Joined
Nov 27, 2008
Messages
636
Location
West Mids
Car
A Merc.
If I go ahead with this I will be renting to a family friend who himself has a partner and 2 young children that will be living in the property. I will be managing this myself so will not be using a property management company.

I just want to be fully aware of my leagal responsabilities in terms of tax, I heard from someone else that if rent is equal to the mortgage then you dont need to pay any tax? Not sure if this is true?

Tricky letting to friends or family. I'd still use an agent as an intermediary if you can. My agent sorted a couple of issues over the xmas holidays for me without me having to get involved. One broken down boiler, one frozen downpipe and a dead fridge. Not major things, but time consuming enough to have to sort out plumbers etc and pay for yourself. Would have been quite intrusive for me and my family when we're trying to have xmas, but also these things need to be done quickly as tenants can't be without heating, hot water, flushable toilet or a fridge etc. and I wouldn't have been able to do that alone.
 
OP
OP
M

M3 SHAM

Active Member
Joined
Jun 24, 2011
Messages
96
Car
2005 C180K Avantgarde SE (Sports Pack)
Thank you very much for the info guys, at the moment its is a possibility so I will see how things turn out.
 

rizzer

Active Member
Joined
Aug 23, 2009
Messages
99
Location
Gloucestershire
Car
120 Dualiner
Mortgage interest is offset against rent. You will need an Energy Performance Certificate, EPC, cost around £40 one off. Landlord Gas Safety Cert, LGSC, cost around £50 yearly, I think electrical installation test is recommended, we always do it and it should last 10 years, cost can vary, we normally do it as part of rewire, cost around £50 - £150. I think there will be a Capital Gains tax issue when you sell, but as its only for a year and you will have a CGT allowance, any tax payable shouldnt be to much. You can also put any expense against the income. You'll need Property Owners Insurance for Letting and you can protect rent income in the event if the tenants unable to live in the property for some reason, it would also pay for alternative accommodation if needed. Always use an Agent and try and speak to a local builder you can trust, yes we do exist, to deal with any issues while your away. Hope all works out okay for you.
 

Users who are viewing this thread

Top Bottom