Rental Income and PAYE

[BillHicksRIP]

Thanks very much Martin.

[ContrataxLtd]

If I rent my old house out, can I deduct expenses for interest, maintenance, insurance etc. from the income I earn from that?

Hi BillHicksRIP

I assume the old house is no longer your main residence and as such is just a normal property let. In this case you can deduct the usual expenses from the rent received - mortgage interest, maintenance, insurance, 10% wear & tear allowance if fully furnished, repairs etc.

Just as a side point too as it may be relevant to the thread, you don't have to use the rent a room allowance when renting out a room in your main residence, you can elect to treat it like a normal rental as in some cases this can be more tax efficient.

Martin
Contratax Ltd

[BillHicksRIP]

Simon, is the £4,000 you are referring to the rent a room allowance of £4,250 per annum? If so you can't deduct expenses from the rent for this and it has to be generated from renting a room in your personal residence rather than a typical rental property. If it's a typical rental property there isn't a 'standard allowance' you can earn before paying tax, other than where it is covered by the normal personal allowance.

Hope this helps

Martin
Contratax Ltd

If I rent my old house out, can I deduct expenses for interest, maintenance, insurance etc. from the income I earn from that?

[ContrataxLtd]

Isn't it over £5771? A salary of £5772 would be OK.

Yes that's correct, a salary of £5,772 would be fine but nothing less i.e. £5,771.50 wouldn't be. I should have made this clearer in my original post.

Martin
Contratax Ltd

[TheFaQQer]

Hi Paul

To earn a qualifying year you have to pay over £5,772 in salary for the year (2014/15) rates. Generally speaking it is worth ensuring you earn the qualifying year even if it means paying a little bit of tax on the rental profit.

Martin
Contratax Ltd

Isn't it over £5771? A salary of £5772 would be OK.

[phayes]

Thank you very much.

[ContrataxLtd]

Thanks for that, I was going to mention about the state pension, would you mind telling me how much I would need to pay myself per annum to qualify for state pension.

I take it the sensible way to go would be to qualify for state pension and just pay tax on the rental income?

Paul.

Hi Paul

To earn a qualifying year you have to pay over £5,772 in salary for the year (2014/15) rates. Generally speaking it is worth ensuring you earn the qualifying year even if it means paying a little bit of tax on the rental profit.

Martin
Contratax Ltd

[SimonMac]

Simon, is the £4,000 you are referring to the rent a room allowance of £4,250 per annum? If so you can't deduct expenses from the rent for this and it has to be generated from renting a room in your personal residence rather than a typical rental property. If it's a typical rental property there isn't a 'standard allowance' you can earn before paying tax, other than where it is covered by the normal personal allowance.

Hope this helps

Martin
Contratax Ltd

That could be where I am getting confused, cheers!

[MarillionFan]

IIRC you are allowed about £4000 rental income before paying tax on it, but there are deductions you can make (ie take the interest off, any building expenses, insurance etc).

One of the nice accountants will be along soon to give you the full details.

Incorrect. It's all income and so the first 10k can be tax free as with normal income. So 5k salary and 5k rental would be fine.

[phayes]

Thanks for that, I was going to mention about the state pension, would you mind telling me how much I would need to pay myself per annum to qualify for state pension.

I take it the sensible way to go would be to qualify for state pension and just pay tax on the rental income?

Paul.

[ContrataxLtd]

Hi,

On recently completing my self assessment I noticed that my personal allowance offset some of the net income I received from my rental property.

As a basic rate tax payer does this mean that if I pay myself for example £5000 pa salary and received £5000 net rental income I would not pay any tax?

Regards,

Paul

Hi Paul

That's correct, you can earn £10,000 for 2014/15 before paying tax so if you had a salary of £5,000 and net rental income of £5,000 you would be fine here.

You may want to consider paying a larger salary if you have the choice so that you can ensure you earn a qualifying year for state benefit/pension purposes but that's off tangent.

IIRC you are allowed about £4000 rental income before paying tax on it, but there are deductions you can make (ie take the interest off, any building expenses, insurance etc).

One of the nice accountants will be along soon to give you the full details.

Simon, is the £4,000 you are referring to the rent a room allowance of £4,250 per annum? If so you can't deduct expenses from the rent for this and it has to be generated from renting a room in your personal residence rather than a typical rental property. If it's a typical rental property there isn't a 'standard allowance' you can earn before paying tax, other than where it is covered by the normal personal allowance.

Hope this helps

Martin
Contratax Ltd

[SimonMac]

Hi,

On recently completing my self assessment I noticed that my personal allowance offset some of the net income I received from my rental property.

As a basic rate tax payer does this mean that if I pay myself for example £5000 pa salary and received £5000 net rental income I would not pay any tax?

Regards,

Paul

IIRC you are allowed about £4000 rental income before paying tax on it, but there are deductions you can make (ie take the interest off, any building expenses, insurance etc).

One of the nice accountants will be along soon to give you the full details.

[phayes]

Hi,

On recently completing my self assessment I noticed that my personal allowance offset some of the net income I received from my rental property.

As a basic rate tax payer does this mean that if I pay myself for example £5000 pa salary and received £5000 net rental income I would not pay any tax?

Regards,

Paul