# Pitfalls of renting out to cover costs?



## McNulty (3 Apr 2011)

Hi

I'm heading back to the UK for work and looking to rent out the house to cover some of the shortfall in the mortgage. I intend to seek professional advice as well, but would like to get a couple of hopefully simple answers in advance...in the UK myself and family will be living with my folks for a while..

1. If I rent the house out, does that mean I will automatically lose TRS even though I don't have another house in the state?

2. If the rental income is my only income in the state (it will be), will I effectively come in under the tax threshold for income at the end of the year and not have to pay any tax on my rental income?

3.Any other nasty surprises that people can think of I'm missing?

To be honest, it's looking more tempting to try and get onto interest only and leave the place empty - I think I would actually be sending back less cash if renting out meant a hefty tax bill, loss of TRS and the bank using it to get me off a tracker (my contract is currently not that clear)

any advice welcome - thanks

J


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## ajapale (3 Apr 2011)

Moved from  Mortgages and buying and selling homes to  Property investment LL and tenants' Rights/Responsibilities which is where this type of discussion is held on AAM.


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## z107 (3 Apr 2011)

> 3.Any other nasty surprises that people can think of I'm missing?


The condition your property will be in when you get it back.
This is a gamble.


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## Greta (3 Apr 2011)

Your family could rent out a room or two in the house, keeping a room for their own use and maybe staying there once in a while, to maintain the house as their PPR. If the rent collected is below 10,000 euro, it will then be exempt from tax under rent-a-room scheme.

The answer to question 2 is no, if you rent the whole house, you will be entitled to claim only a portion of the tax credits, according to what proportion of your total world-wide income your Irish income will represent.


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## csirl (4 Apr 2011)

Greta said:


> Your family could rent out a room or two in the house, keeping a room for their own use and maybe staying there once in a while, to maintain the house as their PPR. If the rent collected is below 10,000 euro, it will then be exempt from tax under rent-a-room scheme.
> 
> .


 
The OP is moving to the UK, so this is not an option. To avail of the rent-a-room scheme, you must permanently live in the house i.e. sleep there most days of the year.


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## Greta (5 Apr 2011)

csirl said:


> The OP is moving to the UK, so this is not an option. To avail of the rent-a-room scheme, you must permanently live in the house i.e. sleep there most days of the year.



No, you don't have to sleep in the house most days of the year for it to be your PPR, this is just something that has been made up on forums but the Revenue have nothing to that effect. The house must be available for your use, and you must stay there at least some time, and at any one time you can only have one PPR, but that's all.

OP's family is staying with his relatives in Ireland, not going to the UK, so it may be possible for OP's spouse to claim rent-a-room scheme, if she stays in the property at least occasionally. However, it can get tricky with him being in the UK, the best advice would be for OP to get professional advice on this one.


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## Butter (8 Apr 2011)

You will lose TRS on the house if you offically rent it out.  
You may have to change off your tracker to an investment mortgage depending on what your mortgage holder says.  
Your rental income will be added to whatever your income is in the UK and you will be liable to pay tax on the rental income.  You won't have a tax free allowance here and another tax free allowance in the UK.  You won't have to pay tax to both the Irish government & the UK government though - it is lumped in together in whatever juristiction you are living in.  Although I have a feeling if you pay less in the UK on your rental income than what you would have paid here you will owe the extra to the Irish Revenue.
It is entirely possible that with the hassle of being an overseas landlord you would be better off to go interest-only & leave the house empty.  You need to sit down and work out the financial ramifications of all options and you may be better to seek the advice of an accountant.


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## Bronte (12 Apr 2011)

McNulty you'll have to do the figures on the different options, renting and losing tracker, not renting but paying interest only, but a house needs to be taken care of, maybe rent free in return for a relation maintening the property. Have a look at Airgead07's post on costs and other key posts on here. There are very few people not having to pay tax on rental income. If you post up the full figures on the various options we can have a look at them for you.


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## McNulty (15 Apr 2011)

Thanks everyone for the input. I've posted about my experience with PTSB and trying to go interest only on another thread - currently not happening but appealing it.
To clarify - I will be going to the UK and moving in with my parents for a while so my rental costs over there will be virtually zero.

Current mortgage is an ECB + 2.25 with about 300K outstanding, so I'm paying around 1150 a month. I've had the house nearly five years so have a couple of years TRS to go. I epxect If I lost TRS, for the mortgage to go up to around 1350.

Gross rental income likely to be 850 per month

Costs would be €50 per month management fee

Plus initial fixed costs of around €200 for PRTB and BER cert
Plus I estimate around another €800 for a spruce up and professional accountancy services

Before tax I'll be down around €550 a month (which admittedly is better than €1150!)

Trying to understand how much tax I would pay approximately before making the call. I am seeking professional advice from an accountant - they don't seem to want to ring me back.

I'm also not clear on my contract still - it seems very short - only a couple of pages - and I can't see any clauses regarding rental on it - doesn't mean they aren;t hiding in the long grass though!


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## de_man (15 Apr 2011)

j
i'm sending you an email via PM

regards


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## iscritto (15 Apr 2011)

> To be honest, it's looking more tempting to try and get onto interest only and leave the place empty -



Need to check the insurance cover if you take this option. Most normal policies won't cover a house vacant for approx 3 months +. Might just mean have a friend staying there a few nights a week. Not 100% sure how this works.


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## McNulty (17 Apr 2011)

Are there any specific costs I am missing? I'm not sure I'm going to get Interest only at the moment so my current costings are

Do nothing cost equals €1165 per month (I have 2 years of TRS left) and I'm on a tracker of ECB +2.25

Rent out  - I estimate my cost goes up to approx 1365 (loss of TRS) assuming (although I will seek onfirmation in writing that I keep traker)

Rental income is approx 800 after management fees

Is there a straighforward way to roughly work out how much tax I will end up having to pay? Lay people are telling me it's 20% but I will be able to claim back at the end of the year?


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## Butter (17 Apr 2011)

Read this thread - http://www.askaboutmoney.com/showthread.php?t=153758 it will give you the basis of working it all out.  
Forget about lay people telling you 20% and work it out properly if you are going to be able to make a rational decision on what to do.  If you are working in the UK you will have to pay tax in the UK on your rental income here.  If you pay the Inland Revenue less than you would have paid here you will owe Revenue here the difference.  And no you will not be able to claim the tax back.

Most important to remember is that you can only use the amount of the interest portion of the mortgage as an expense not the full mortgage payment (and only 75% of that is allowed)


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## McNulty (18 Apr 2011)

Thanks Butter

I'm just struggling with fully inderstanding it - I did find the post useful. I am seeing professional advice from an accountant as I want to be 100% compliant, particulalry with the UK aspect as well.  

The 'claiming back' bit was in reference to be being a non-resident landlord - the management agency offer a service to deduct 20% at source as per the rule from revenue. I'm assuming this is just to be holding the funds rady for settling up in the tax return at the end of the year and if if my tax liability at the end of the year is less than 20% x 12, I must get that back from them? 

I've always been a PAYE worker so no real experience of dealing with tax returns etc.

Appreciate the help - am sure some people shake their head at the questions asked on here, but it's a really useful resource!

cheers


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