Renting out primary residence

If I were to rent out my primary UK residence for 1 year (I have no other NON-UK residence either but that's my problem!) what happens with council tax - do the people renting it from me pay it - and what about other bills? Things like buildings insurances / ground rent / maintenance /service costs, etc - or do I just factor these into whatever I decide to charge?

Also, what would be the tax implications for renting out my only abode (I would be going travelling for 1 year = no other income!)?

TIA

Reply to
<nospam
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Usually the tenants pay the utility and council tax bills. It will depend on the agreement that you have.

these are easier to factor in.

If you are going away for a year you are best off using an agent to manage the property and they will have all you answers.

Reply to
Zoe Brown

Essentially that's entirely down to the agreement between you and the renter. However normally (as I understand it) the way to do it is:-

Renter pays gas, electricity, phone, water etc. (i.e. all utilities) contents insurance for their stuff council tax (slightlt greyer area)

Landlord pays Buildings insurance Building maintenance

If you actually go for 365 days or more the situation is different from a period less than a year. The details may have changed since I was working abroad though, and are quite complex, others here will know better than me.

Reply to
usenet

You should check with your buildings insurer that they will cover this situation. Firstly you may have signed a declaration that you will not be out of the property for more than 30 days at a time, and secondly renting out a property is likely to be deemed a higher risk.

Rob Graham

Reply to
Rob graham

What do you mean by "primary UK residence"? There is no such thing. Generally you have zero or more residences, regardless of where they are, and unless you have none, one of them will be the primary. It sounds like you're saying you have (a) non-UK residence(s).

Remember, a house you rent out cannot be your residence, a residence is somewhere *you* actually can live (which you can't if you've signed over occupancy rights to a tenant) and do live from time to time.

As others have said, you are usually responsible for buildings maintenance and insurance, which are therefore factored into the rent, while the tenants are responsible for everything else, though sometimes some of them can be factored into the rent.

There are two taxes affected. Capital Gains Tax would potentially apply because the house would lose primary residence status for that year. It's unlikely any liability would arise, though, at least not under current rules.

Income tax applies to the profit you make from renting, i.e. the excess of rent collected over your expenses which would include mortgage interest, buildings insurance, repairs, maintenance, anything else factored into the rent, and if you're renting furnished then *either* the cost of maintaining, repairing, and replacing (but not acquiring) contents *or* a wear and tear allowance equal to 10% of the rent collected (not including anything factored in).

If you have no other income, then this may well mean your profit will be too small to be taxed, and fall below the personal allowance, but this could be made awkward unless the year of absence more or less coincides with the tax year. If you leave and return half way through, then in each tax year you'll have to pay tax on half a salary plus half a year's rental profit.

Additionally, if you're going abroad, there are rules which say the expected income tax must be remitted direct to the taxman while you're away, and any tax overpaid can be reclaimed in your next tax return. If this is a short-term one-off you might get away with conveniently forgetting this, and just paying with your tax return in due course.

Reply to
Ronald Raygun

I've been living overseas for a number of years, and have been renting out a UK property.

You can negotiate it any way you like with the tenant, but the way it normally works is;

Tenant pays: Council Tax and utility bills.

You pay: Maintenance costs and building insurance.

The reason you should pay the insurance is its in your own interests to make sure the policy is always in force in case there's a claim by a third party (eg roof tile falling off and injuring someone etc.). If you agreed that the tenant would be responsible for insurance, but he had allowed this to lapse, then you would have no protection against a claim made against you.

In my case, I did agree with the tenant that he would be responsible for maintenance, and that seemed to work quite well. Its not easy trying to arrange for repairs to be carried out while you're away overseas.

Unfortunately, you'll still have to pay tax on the income from the rent. If you use an agent, he is required to withhold part of the rental money. If the tenant pays you directly he will have to deduct that from the rent. You can deduct maintenance costs against tax, and you still have your personal tax allowance.

Chris

Reply to
Chris Blunt

Thanks for your reply - out of interest - is the UK property your own home or a BTL or similar? I just wondered about it because this is my only home and so different rules may apply to my situation. You've all got me worried now that it might not be possible to do it in the way I thought possible re: buildings insurance (that 30 days occupancy contract thing) and even the subletting clauses of my mortgage / lease! Argh!

Reply to
<nospam

You may need to go to an insurance broker for the more specialist type of cover for landlords. If you are going to use an agent - which I would generally suggest - he/she should be able to assist.

Reply to
Doug Ramage

You've all got me worried

Don't fret about the insurance. If you contact your insurer and he doesn't like what you are saying, then get a landlord's policy. Plenty of them about. All I was meaning was that you need to address this point.

Rob

Reply to
Rob graham

The clause requiring all utilities switched off, water drained, heating to prevent frozen pipes and fortnightly inspections for unoccupied property is common.

I would suspect that a lot of landlords don't bother. To cover my arse I gave written instruction to my agent to do this. I doubt if they bother !

I fear that your biggest problem may be the lease, unless other flats in the building are already let out.

Specialist BTL insurers that I use are Alan Boswell & Letsure.

Officially you need to tell the mortgage company, but that's only for their own convenience and they may raise the interest rate, impose a different LTV or reduce the mortgage payments to ensure that rent is ~130% of mortgage. As long as you issue a ground 1 notice (mortgage interest) to a tenant, I can't see much point in telling the mortgage company.

Links and general info. on my webpage

Daytona

Reply to
Daytona

Apart from the fact that this is wrong, it is irrelevent to the OP who said that they won't be earning during the period away.

The income from the house will always be taxed in the UK regardless of the residency status of the owner.

The residency of a person only affects their non UK sourced income.

tim

Reply to
tim (moved to sweden)

It can't be his home while he's renting it out. The only point of interest affecting taxation is whether it might once have been his main or only home, or will be before he eventually sells it.

The income tax position is not affected by whether it was your home prior to letting or whether it was purposely bought for letting.

It only affects CGT liability at the point when you come to sell it. Broadly, the rules are that the gain is calculated (selling price minus buying price minus expenses involved in buying and selling) and then adjusted by an indexation allowance (for inflation of buying price and buying expenses up to April 1998, thereafter taper relief takes over).

Suppose the indexed gain is £70k.

Then the proportion of the period of ownership during which it has been your home is used to reduce your gain. This is called Pricipal Residence Relief. Supposing you owned it for 7 years and during 6 of those years it was your Principal Private Residence (because you rented it out for 1 year). Then you'd get 6/7 of the gain relieved, i.e. you get PRR of £60k.

The last 3 years of ownership always qualify for PRR no matter what their actual status, so if your letting year was entirely within that window, you'd get full PRR anyway.

Suppose your letting year was prior to this window. Then you'd get Lettings Relief for that part of the non-PPR-relieved period which was involved in letting. In this case, therefore, you'd get £10k LR and your taxable gain would be zero. LR is limited to £40k, though, and also to the amount of PRR, but these limits would not bite in this example.

After that, taper relief kicks in, and there's also your (and if relevant a co-owning spouse's) annual personal CGT allowance to come off. This all boils down to it being very exceptional that anyone who has rented out their home will ever have to pay a significant amount of CGT upon selling it.

But if you buy to let and then sell without ever having made it your home, you get no PRR and no LR. Only indexation, taper, and annual allowance are available, and it's much likelier that a nonzero tax bill will result.

Reply to
Ronald Raygun

You get landlord's insurance, which probably costs a bit more.

Reply to
Jonathan Bryce

In message , snipped-for-privacy@nospam.com writes

The other posters have covered most of the other points but I didnt see anybody mention that if you have gas appliances in the property then you will need a landlords gas safety certificate form a Corgi gas man before you can rent it out.

Reply to
john boyle

Indeed. Every year.

And you have to fit a smoke alarm or two.

Did anyone mention the HMO issue? If you're going to rent it to a collection of people who between them are not members of at most two families, you will need an HMO licence, which will cost a fortune and will require the property to meet certain additional pointless standards, like having all (most?) internal doors fitted with closers and with intumescent strips which will cause the doors to jam shut in the event of a fire, trapping the inhabitants. Well, no, actually, if they get hot they swell up and form a seal against the frame which is supposed to prevent smoke crossing the threshold.

Basically you can't rent to three or more unrelated people.

Reply to
Ronald Raygun

Yes, but if the OP earned anything in addition to the income from the rent then his tax situtation would be affected by his residency status and the income from the house rental comes into that equation as well doesn't it?

I did also say that others here would be able to come up with more accurate answers so I don't believe I was being misleading anyway.

Reply to
usenet

As far as I'm aware, this only applies in Scotland.

Reply to
Jonathan Bryce

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