Buy-to-let tax questions

Yes.

Yes.

"Doug Ramage" wrote

"Yes", offset against *tax payments* ? Or simply against *taxable income* ?? :-(

Deary me. Where else have you been asking? These are pretty straightforward questions will well known answers. Be sure not to ask there about other aspects of the business.

You can wear as many hats as you like, in terms of how many businesses you run or streams of income you have, but for income tax purposes, it's not the hats that count, but the head. You only get *one* personal allowance, *one* starting rate band, and *one* standard rate band, not one of each per hat.

Or, in a word, yes.

Against rental income, yes. It reduces your taxable profit, so it only reduces your tax bill by 40% of the amount. As a rule, by far the biggest allowable expense is likely to be mortgage interest. And then there's insurance, repairs, maintenance, letting agency fees, and, if furnished, you may opt for a Wear and Tear allowance of 10% of the rental income (but if you do, you can't then also deduct the actual cost of repairs to or replacement of furniture).

Guys, thanks for the responses.

Ronald, I don't quite understand what you mean by ' It reduces your taxable profit, so it only reduces your tax bill by

Also, FYI the IR was one of the sources that gave me incorrect advice. Occurring to the lady I spoke to there, it is the hats that matter!

Thanks again.

rt.

Buy some hatstands them, tax-deductible expense ;-)

I assume RR means that an allowable expense is only worth 40% in "cash" terms, for a 40% taxpayer i.e. the expense is deducted from the income, and the net profit is taxed at 40% (or as appropriate).

Have you read the Inland Revenue's booklet IR150 "Taxation of rents. A guide to property income"?

It's available from their website :

Exactly, for example: Total income from rent: £8000. Total expenses of the rental business: £5000. Therefore total profit is £3000 and hence the tax bill is 40% of that, i.e. £1200. Each additional pound of allowable expenditure would reduce the tax bill by 40p, not by £1. Therefore it technically wrong to say expenses can be offset "against tax", you should say they're offset "against income".

The lady in question was clearly talking, as John Wayne used to say, "through her hat". :-) Maybe she misunderstood your question.

Don't read it at bedtime, though. It's so thrilling, it'll keep you awake all night.

Understood.

Will read the booklet.

Thanks again.

rt.