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bigduckontax, Accountant
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I am based in the UK and am a British citizen. I am

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I am based in the UK and am a British citizen. I am trying to work out whether I can afford to let my flat in the UK and move with my partner into rented accommodation to be closer to work. I am trying to calculate my take home income, after tax, of my salary and any rental income I receive. This is so that I can deduct mortgage payments and costs to work out if I can afford to pay rent. I know it should be simple income v expenses exercise but every time I try to calculate it I come up with a different figure and need a clear formula I can use (or someone else to do the calculation for me) to feel assured before I sign any tenancy agreement.
I also want to know whether I can afford to use a letting agent or not.
If someone could help, I will provide detailed figures.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
It is all so simple as the Mercat in the TV advert said! If you rent out your flat in the UK then the interest element only of any mortgage payments can be deducted from the rental received to reduce the taxable amount due to be added to your existing salary to derive an income tax estimate. The following items may also be deducted (source, Which):
'The most common types of expenses you can deduct are:
Water rates, council tax, gas and electricity
Maintenance and repairs to the property (but not improvements)
Contents insurance
Interest on a mortgage to buy the property
Costs of services, including the wages of gardeners and cleaners (as part of the rental agreement)
Letting agents' fees
Legal fees for lets of a year or less, or for renewing a lease of less than 50 years
Accountant’s fees
Rents, ground rents and service charges
Direct costs such as phone calls, stationery and advertising for new tenants
The expense should be incurred wholly and exclusively as a result of renting out your property.'
Once you have the net figure, add it to your existing salary to derive a total which will be subject to UK Income Tax.
When you eventually sell you will be liable to Capital Gains Tax (CGT) on the proportion of the gain made on disposal. This effectively means that CGT will only be charged for the let period of ownership (less the last 18 months when you are deemed to be in occupation even if this is not the case) and you would be entitled to Lettings Relief of up to 40K instead of your Annual Exempt Amount (currently 11.1K).
Whether to employ a lettings agent to act on your behalf is frankly up to you, it does relieve you of responsibilities, but it does cost.
I do hope that I have been able to shed some light on your position. Time for the wet towel round the head and the backs of several envelopes for you to work it out!
Customer: replied 2 years ago.

Hi Keith

Thank you.

I have been adding the entire rental income (£17680) to my salary income (£52500) and calculating the tax. What you are saying is that I should only add the difference between my income and my expenses which is £9450 without letting agent fees and £12210 with letting agent fees.

So I add £9450/£12210 to £52500 and calculate my tax from there?

I know it is simple but I find numbers difficult.


Sam, you have it to a T.
Don't forget to take off your personal allowance of 10K last year, 10.6K this tax year. You will have a tax liability on approximately 52K of income on your figures (not using a letting agent).
Please accept my apologies for the short delay, I am diabetic and was having lunch. Please be so kind as to rate me before you leave the Just Answer site.
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