Updating post from Reddit.
Hi all
I own a house, it’s 2 bedroom - I’m looking to move in with my girlfriend, she owns her own place.
Our plan is to live together for ~12 months and then look to sell one of the properties to buy another house.
However, I don’t wish to sell mine.
I am on 40% tax at work so I am looking at the most cost effective way to rent it out. I don’t need to make profit on it, just covering the mortgage is fine.
What are the best routes to go about this? Would I only pay tax on profit post management company?
Could I just rent a room out individually as a live-in landlord (although never stay there?) as I understand you don’t pay tax on ~£7500.
Never done this before but looking for advice
Thanks
Letting it out will be a massive hassle, quite possibly losing you money (after costs and tax), and if you are not lucky with the tenant you might have trouble getting them to leave at the point you do want to sell it. Then on top of that you'll almost certainly have to pay some CGT when you sell it.
Your best option is to sell it now and invest the sale proceeds in a suitable way depending on how soon you need access to the funds (i.e. stock market for long term or cash savings or bonds for short term).
Another benefit of selling now is that you then have the funds ready and available for when you want to buy with your partner, rather than possibly complicating the chain by having two properties to sell at the same time.
>Could I just rent a room out individually as a live-in landlord (although never stay there?) as I understand you don’t pay tax on ~£7500.
Absolutely not
You just want to cover the mortgage, but you'll have to switch to a BTL to rent out, so you'll only be paying interest, mate. Sell it and invest the money
This raises an interesting question about lodgers which I've always wondered about.
I get that if the landlord does not live at the property at all, then any tenant cannot be a lodger. But does the landlord have to live there a certain proportion of the time for the tenant to be a lodger, and if so, what proportion?
The test is that it must be their "main or only" home.
It's not a time based test.
Someone could be away travelling for business and staying in hotels 5 nights a week, and it would still be their main or only home. Likewise they could be away on an oil rig, or on a military tour of duty, for months at a time, and it would still be their main or only home.
They could have a holiday cottage in Cornwall, but their Birmingham home is where they spend most of their time, so they could have a lodger in Birmingham but not in Cornwall.
OP, however, is proposing to move in with his girlfriend. It's quite clear that his girlfriend's house would be his main home.
Dont forget rent reform will be putting more requirements on you as a landlord in that you will need to register for some sort of redress scheme which is an added expense then you need to make sure the property is up to standards to rent it out so gas cert, elec cert, if you have a mortgage then they will need to agree consent to let. It sounds like you are a higher rate tax payer so again you will be stung for taxes it really is not a lucrative idea anymore for the stress and hassle. Rent reform will make it harder to issue an eviction yes one ground to sell property will be added to section 8 but how long will the courts take to sort out the new process you could end up well over a year trying to gain the rights to sell. Taxes are on the entire rent too which is pre everything then you can deduct allowable expenses at the rates they allow for. You can use a platform like taxd to figure out what sort of tax bill you will face. Renting it out and living there is live in landlord living elsewhere is fraud or tax evasion as this is no longer a lodger based agreement and the tenant will be on an ast.
What is taxd?
Some platform helped to make self assessment easy. I used it for my first time after my accountant priced themself out of my budget and was very impressed.
I think they might of made some changes but still seem reasonable and each form entry is explained really well. I can't remember what the free bit was I think you can do a whole self assert and only pay when you file to hmrc.
Err no.