MrsFychan

as our buyer pulled out on the day of exchange we are now looking to rent the property out for 12mths with a 6mths break clause from January. Property will go back on the market in April.

Does anyone rent out their UK home just to cover the mortgage and/or does anyone know the tax implications on doing this. We are not managing the property ourselves but leaving it all up to the letting agent.

florabundi

Don't know the answer, just wanted to bump up the post in the hope that someone can help. Our house isn't sold either and we may have to consider renting it out.

Cape Blue

NRL1 form required.

UK income tax on profit (rent minus mortgage interest, agents fees, gas safety, insurance, 10% wear & tear allowance, etc). If your UK income (this profit plus any other) is less than the UK personal allowance (circa GBP7K each) then no tax.

NZ - not sure, but likely any profit is added to your income and taxed at your marginal rate (if you pay any UK tax, this is likely deductible in NZ).

Get proper lettings insurance, be prepared to have to repaint etc when you decide to try selling again.

Si19761

We couldn't sell so are renting out. For UK as below. For NZ you get 4 years tax ememption, and then apparently its hefty, we are not near that stage yet so hopefully someone will be along who knows more. If you take tax exemption you can't apply for some family tax credits so you have to way up which is better.

For our house we pay for lawns and gardens as well so we know they are done and the neighbours are also happy. You need to change your mortgage to a buy to let or negotiate with your bank as they get a bit unhappy if you use a normal mortgage but also change to landlords insurance. We also have £5k contents cover for curtains and bits and pieces we left for tenants.

Good luck and hope all gets sorted...

luvwelly

Usually if you have a mortgage there is no UK tax to pay after you have deducted all the eligible stuff. My mortgage repaid recently but the latest tax return still has a profit well below the UK tax free allowance so no tax in UK is payable but as a non-resident I have to download an approved piece of software to file my return which costs 15-20 quid.
In NZ after 4 years you have to pay NZ tax on all your worldwide income with no tax free allowance in NZ. Not sure how the dual taxation agreement between UK and NZ works here though.

I only rented out UK house knowing we could cover mortgage in event of tenant not paying up (and that did happen but in 8 years only the once did I have to pay legal fees to evict someone but I have kept the same tenant for the last 3 years and recently put their rent down not up to retain them). A reliable long-term tenant paying less rent is better for you than a dodgy short-term one paying more.
A managing agent is essential but they will rip you off to some extent. My current one is much better than my first.

Whenever the tenancy turns over they make more fees (inventories etc) so their interest in maintaining a reliable tenant is not exactly the same fit as yours. For instance the monthly fee to them is usually a percentage of the rent. This means they can drive good sitting tenants away if you let them.
I have found email works really well with Managing Agent with the time difference.

There are also gas and electricity inspection requirements but the managing agent should ensure you are compliant with these.

You also need to advise your mortgage lender that you have rented out and you may find they insist that you change to 'buy to let'. Your normal household insurance will also be invalidated by renting out. Legal and General do a decent Landlord's policy.

To the inland revenue you submit a non-resident tax return form on line and they view your rented out property as a small business even though it is nothing of the kind lol. (This is good as you can offset so many expenses).

It just goes under UK property income on your personal non-resident form though.

You can also have the rent paid without deduction of tax at source if you complete the relevant form to UK IR and you undertake to do your tax return each year and pay up as required. As I say it usually on a modest house all falls within your joint tax free allowances and no tax is payable.

Hope this helps.