Rental income

lgarside Registered Posts: 122 Dedicated contributor 🦉
Hello I was wondering if someone can clarify something for me.
If a house bought and lived in two years ago is now being rented and the owners have bought a flat, will the rental income be taxable, mortgage repayments 900 rental income 550?

Also if the owners were to sell both properties in a few years time could they claim the house as their PPR and the flat as their second home so less tax would be due on the smaller properties profit?


  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
    Rental income is taxable (income tax). The interest element of the mortgage repayments (not the capital repayments) is an allowable expense against the rental income, as are management fees, repairs to the property (but not improvements) etc.

    I would have to go and look up the CGT aspects of it. Off the top of my head you can only have 1 PPR at any one time and you do actually have to have lived in it. I believe the last 3 years before sale don't matter, so you could live in a property for a bit, then rent it for under 3 years and not have to pay any CGT as it was your PPR. Selling both properties at the same time, I would have thought there would have to be some calculation somewhere and it's worth getting advice now, not just when its sold as there may be a few things you could do to minimise CGT.
    But I've not looked at this for 3 years so best to get a second opinion! Or even a first coherent one! :lol:
  • lgarside
    lgarside Registered Posts: 122 Dedicated contributor 🦉
    Thanks for the help. If You have lived in the house and then move to a flat for a few years can you change your PPR back to your house because you have lived in it prior to renting it out, or would you have to keep your PPR as the flat and use the other allowances such as the last 3 years being exempt etc against the house?
  • Emthi
    Emthi Registered Posts: 53 Regular contributor ⭐
    PPR Election

    After you have bought the 2nd property, obviously within 2 years, you have to make your election to choose which one is your PPR and which is your buy to let property.
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
    You CANNOT make an election unless you are residing in both properties at the SAME time.

    The house remains your PPR whilst you were living there plus last 3 years (plus a host of other potential reasons). The flat, similarly, remains your PPR whilst you were living there plus last 3 years (plus others).

    If you have tenants in the house then you cannot make an election for it to be your main residence.
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