How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5112
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
Type Your Tax Question Here... is online now

I need advice please on my tax rate. My situation is: I

This answer was rated:

Hi, I need advice please on my tax rate.My situation is:
I receive 1,350 GBP in rent a month
I pay 400 a month in mortgage a month
I am starting a new job on Monday 17th October paying 32,500 a year.I have been earning 26,000 from January to August of this year.Could you help me work out what tax threshold I am on and how much tax I should put aside each month to pay for the coming year's tax return please?I look forward to hearing from you, Anna

Hello and welcome to JustAnswer. I am here to help you. I am reviewing your question and will respond to you shortly.

Thank you for your question..

Please advise if the mortgage payment of £400 per month is interest only or both capital and interest.

Do you have any expenses you pay for relting to let property.

Many thanks

Customer: replied 1 year ago.
Hi, I believe it's both capital and interest as it's a repayment mortgage. I've attached it for you though - could you double check I'm right?
I have the letting fees to pay which are at 6%. Otherwise, I don't think there is anything else.Thanks so much, Anna

Thank you for your reply.

Based on information provided, it appears your total income would be within the threshold of basic rate tax. You should put aside £200 per month to cover tax from rental income.

I hope this is helpful and answers your question.

Customer: replied 1 year ago.
Hi, thank you for this. Could you give me a bit of a breakdown please as to how you have calculated this? Thanks so much, Anna
Customer: replied 1 year ago.
Also, I am confused, if my annual rental is: 16,200 GBP and my income is 32,500, the total is 48,700 which is the higher tax band? Please can you clarify this for me? Thanks, Anna

Thank you for your reply.

I am drafting detailed calculations and will come back to you shortly.

many thanks

Thank you for your patience

On a repayment mortgage, normally in the earlier yearsthe majority of repayment covers interest and little goes on repaying the loan.Although the interest figure is unknown it is likely to be £380 per month.

Attached are my calculations for your perusal.

If you need further clarification, please come back.

I hope this is helpful and answers your question.

Customer: replied 1 year ago.
Hi, thank you so much for the breakdown. I am still a little confused, please forgive me!Could you clarify:
Why do you have 2 lines: taxed at 20% and taxed at 40%?
What if I don't spend 1,200 on servicing the proper / maintenance?
Can you clarify what you mean by this: Mortage interest - say 380 Mortage interest relief restricted at 20%again, I am sorry for the questions, but I just need to be really clear on this!Thanks, Anna

Thank you for your reply.

Income tax rates are 20%, 40% or 45% depending on taxpayer's taxable income.

When rental income is added to your salary, your total taxable income exceeds the threshold for income tax at basic rate of 20%.

I have assumed you would most probably pay for maintenance of bolier and service it at least once a year, some minor maintenance and that you would also need building insurance etc. I have allowed £1,200 for these costs based on experience dealing with clients who are landlords.

You have a repayment mortgage meaning your monthly repayments include both interest and capital repayment. There are changes to interest relief available on buy to let properties which come into force wef 6 Apr 2017. Although in tax year 2017-18 75% of interest payment would attract tax relief at marginal rate and 25% at basic rate of 20%, in tax year 2020-21, all interest paid would attract tax relief at basic rate at 20%. In my example I have assumed tax relief on interest paid is restricted to 20% for ease of calculations. More information on mortgage interest relief restriction is covered here

I am still of the opinion that setting aside £200 per month should cover tax payable on rental income.

I hope this is helpful.

Hi there

Just checking if you are happy with the responses or need further clarification.

Many thanks

Customer: replied 1 year ago.
Thanks - that is really helpful! Have a good afternoon, Anna

Thank you for your good words.

If there are no more issues, I will appreciate if you would kindly rate my service/accept the service I have provided before you leave the site, to ensure I get credited for it by Just Answer. and other Tax Specialists are ready to help you

I thank you for accepting my answer.

Best wishes.