Renting out the family home and renting elsewhere?

Alot of people, myself included, are living with young kids in inappropriate areas or in inappropriate housing types (i.e. apartments with young kids)

My wife and I were looking at the idea of renting out the family home, and renting ourselves a house in a better location for the kids to be able to play on a green etc.

We are in negative equity, although not as much as some, but would be unable to sell the house and buy elsewhere at this juncture.

I have looked into this and it seems that we have to pay tax on the rental income and can only deduct 70% of the Interest portion of the mortgage. On top of this we will have to maintain the house, insure it and pay a letting agency. This would mean, despite being able to attract a rental income equivalent to the mortgage repayments, that we would be left with a significant annual shortfall to pay out of our own pockets.

Is my understanding of things correct? and does the government have any plans to do anything about this situation, perhaps making rental income from your family home exempt from tax or similar?

I know a number of people stuck in apartments etc. who are stuck in negative equity but earn enough to move via renting as outlined above, or if it were possible move the negative equity portion onto the next property were financial institutions offering such products. This seems a rather contrary situation.

Just to make you really happy this is what may happen in the next year or so -maybe some of the following ,maybe all, depending on the strength of those in power who equate property ownership with theft.

1. NPPR will increase.
2.There will be a property tax -flat fee at first.
3. water charge -but for a year or so a flat fee regardless of consumption.

-it is probable that none of the above will be tax deductable against rental income.

4. The present amount of interest that is tax-deductible against rental income will decrease/disappear.
5. And ,of course, ECB interest rates will increase- if all reports are to be believed.
6. And, depending on the conditions of your bank loan, the bank may charge you extra - regardless of general interest rate increases - from turning your home into an investment property.

So, you are right in your assumption that even though your rental income may appear to equate to your mortgage repayments, you'll end up paying more - far far more than you imagined.