Tax on income from rent

chris_hare

Hi

Can anybody tell me if I can claim tax relief on the mortgage interest of my main house while renting out my flat that has no mortgage.

If my main house had no mortgage and the flat did i can claim tax relief on the loan interest. Just want to know if it can be done the other way round.

Anybody got experience in this area

Thanks

Spike

CLAPTON

Yes, you can claim for the interest element of your main property mortgage for up to the value of the flat when first rented

chris_hare

Many thanks, any idea where i can read up about this

Thanks

Chhris

Any

http://www.hmrc.gov.uk/manuals/tctmanual/TCTM04700.htm

HI, this is a link to HMRC page where is stated what can you deduct from Property (rent) income.

Zebra

Sorry to hijack the thread.

But whereabouts does it actually say you claim tax relief in this instance, as it says "interest payable on any loans used to buy THE land or property"?

Is this a well accepted situation, as it also applies in my case?

Thanks.

MarkyMarkD

It is not required for the loan to be secured on the property which you are letting out. It is completely irrelevant what asset is used as the security for the loan.

If you owned the flat first (say, bought for cash) and then bought the house to live in, with a mortgage, then you had to borrow the value of the flat more than if you had sold the flat and bought the house.

So the amount of the loan which is attributable to the flat is the value of the flat when it was first let, as CLAPTON states.

Regarding Zebra's question, yes it is a well accepted situation. Many BTL investors have lots of properties and lots of mortgages. The amounts of the mortgages on each property do not necessarily match the value of each property, but nor do they need to. In fact, because it's impossible to get 100% mortgages for BTL purchase, many investors will borrow (say) 25% of the value on their own mortgage, and 75% (say) secured against the BTL property. But the whole 100% is tax relievable.

Zebra

Thanks Mark.

I'm new to the letting business, are there any sites with tax advice specific to letting?

Mrs_pbradley936

Zebra wrote: »

Thanks Mark.

I'm new to the letting business, are there any sites with tax advice specific to letting?

There is this one:
http://www.landlordzone.co.uk/

which can help with all sorts in the letting business BUT there is no substitute for tailored professional advise and that is deductable too.

Zebra

Thanks Mrs PB.

In the case of a flat as outlined above by Mark, I appreciate that the amount of the loan which is attributable to the flat is the initial value of the flat, but how do you calculate the interest paid on that part of the loan? Is it a proportional value of the total interest paid based on the amount of the loan at the beginning of the year?, or at the end of the year? or is there some other method?

Mrs_pbradley936

Zebra wrote: »

Thanks Mrs PB.

In the case of a flat as outlined above by Mark, I appreciate that the amount of the loan which is attributable to the flat is the initial value of the flat, but how do you calculate the interest paid on that part of the loan? Is it a proportional value of the total interest paid based on the amount of the loan at the beginning of the year?, or at the end of the year? or is there some other method?

Cannot help you there I'm afraid. We just keep everything and send it off to the accountant every so often. One thing I do know I have to do is ask the bank for a statement saying how much mortgage interest we have paid in the preceding year. You have to ask for it every year because it is not something everyone wants and I am not sure if there is a fee. Our mortgage is one of those offset types set against the house (our residence) but paying for a couple of flats. We have a facility of almost £300K but are using about £100K and they keep writing to ask why we are not using the full amount.

silvercar

Use the statement of mortgage interest paid, from oyur lender, as th basis of your calculation. From there you should be able to make a calculation of how much is attributable to the rented properties and how much is for your residential home.

If you have an offset and the outstanding balance fluctuates during the year, you could well need an excel spreadsheet to calculate how much (of the interest paid each month) is attributable to the rented properties. Provided you can show the calculations and justify your methodology you should be OK if inspected.