Renting out primary residence


G

Guest

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
 
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Z

Zoe Brown

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?
Usually the tenants pay the utility and council tax bills. It will depend
on the agreement that you have.
Things like buildings insurances / ground rent / maintenance /service
costs, etc - or do I just factor these into whatever I decide to charge?
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.
 
U

usenet

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

Rob graham

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?
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
 
R

Ronald Raygun

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

Chris Blunt

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!)?
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
 
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G

Guest

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.
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!
 
D

Doug Ramage

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!
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.
 
R

Rob graham

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!
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
 
D

Daytona

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!
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
<URL:http://mysite.wanadoo-members.co.uk/quickhelp/property.htm>

Daytona
 
T

tim \(moved to sweden\)

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.
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
 
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R

Ronald Raygun

Thanks for your reply - out of interest - is the UK property your own home
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.
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.
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.
 
J

Jonathan Bryce

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

john boyle

In message said:
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!)?
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.
 
R

Ronald Raygun

john said:
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.
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.
 
U

usenet

tim \(moved to sweden\) said:
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.
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?
The residency of a person only affects their non UK sourced
income.
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.
 
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J

Jonathan Bryce

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

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