This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.


Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet


Posts: 8
Joined: Sun Nov 29, 2015 10:51 pm


Postby YTS » Wed Dec 02, 2015 8:28 pm

If I bought a property for my daughter and put it in her name and rented it out for less than £10600/annum no tax would be payable as it would fall within her personal allowance. Would she still have to fill out an annual tax return form? If I bought the same house in my name and rented it out the rental income would be subject to tax, the amount I am not sure of in the future as by 2020 landlords will not be able to offset mortgage interest against rental income fully.

Under the current system e.g If the rental income is 12k/annum, and the mortgage interest is £300/month and I currently earn £35/annum PAYE, not taking into account any other expenses I think the tax would be as follows:

12,000 - 3600 = 8400

20% tax would be payable on 7000 (35,000 + 7000 = 42000 - lower rate tax) = 1400
40% tax would be payable on 8400 - 7000 = 1400: = 560

Total tax payable = 1960 ? correct

Does anybody know how the above example would work out regarding tax under the new system by 2020? Any help appreciated

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm


Postby section 44 » Thu Dec 03, 2015 10:53 am

Does anybody know how the above example would work out regarding tax under the new system by 2020?
Basic rate tax credit rather than deduction in calculating letting business profits

Ian McTernan CTA
Posts: 1232
Joined: Wed Aug 06, 2008 3:02 pm
Location: Bedford


Postby Ian McTernan CTA » Thu Dec 03, 2015 11:23 am

New calculation would be:

tax on £12,000:

7000 at 20%= 1400
5000 at 40%=2000

tax payable £3400

Less: tax credit on £3,600 interest actually paid= £720

Tax payable = £3400-720= £2,680.

Net cash position goes from (12,000-3600-1960) £6440 to £5720. If you were a higher rate taxpayer on the whole rental income. the tax charge would be £4,080 and your net cash is £4,320 (that's £720 worse off). Out of that £4320 you would have to fund the repayment, and of course your example ignore agents fees, repairs and the other costs associated with a rental property.

Apparently the new system introduces a level playing field (according to HMRC) between higher and basic rate taxpayers (HR payer now ends up at least £720 worse off than the basic rate taxpayer...).

If you don't like the new system proposed, write to your MP and get some pressure on the Treasury before it's too late.
McTernan Associates Ltd
Chartered Tax Advisers
Email through link on website:

Return to “Property Taxation”