From: Ronald Raygun 
Subject: Re: Renting out primary residence
Newsgroups: uk.finance
Date: Thu, 21 Jul 2005 13:02:09 GMT

nospam@nospam.com wrote:

> 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.