Tax due on rental income

[Iain-Le-Roi]

Hi

If I have an income of approx 34k taxed at the 20% bracket and start to rent a property out at around 10k per year then what will this 10k be taxed at?

The information I can find on it seems to suggest that you pay at which ever rate your other income is taxed at but as this would take me into the higher bracket then would the 10k property rental income be taxed at 20% or 40%?

Thanks

ILR

[centurian]

40% (for the vast majority of it anyway)

which ever rate your other income is taxed at

Assuming you remain within that tax band.

Rental income is just treated as extra income. If it pushes you into a new tax band, then any amount above that is taxed at the new band.

[Jessica@WhiteFieldTax]

Income tax is aggregated: add all income together, deduct all allowances and expenses, apply banded tax rates to the result.

Note: NI is different, it's on a source by source basis on earned income sources.

[Craig at Nixon Williams]

It is the profit from the rental that is subject to income tax. You will therefore deduct any expenses (such as agents fees, interest on mortgage etc) from the income to calculate the taxable profit.

Hope this helps.
Craig

[Iain-Le-Roi]

Thanks for the replies guys. That's clear to me now.

Cheers

ILR

[JoJoGabor]

Don't you only get taxed on the profit, ie minus the cost of the mortgage payments? Or is it the gross rent?

[Craig at Nixon Williams]

Don't you only get taxed on the profit, ie minus the cost of the mortgage payments? Or is it the gross rent?

It is just the profit that you are taxed on. You will get relief on any expenses incurred in renting the property, including mortgage interest, if it is a repayment mortgage you will therefore need to make a distinction between capital and interest and only deduct the interest when calculating the profit.

Hope this answers your question!
Craig