Taxable Rental Income

Al70_2

I have a flat which I have owned for just over 5 years and is solely in my name. I have an off-set mortgage on it.
My wife of 4 years and I lived in this flat from time of purchase until the end of February this year.
We now live in a house we have bought in both our names and rent the flat out. I earn in the 40% tax bracket and my wife is under it.

Questions:
1. My monthly mortgage statements show how much interest I have saved due to the off-set. Will the tax department except this to be added on to the interest actually paid as the full allowable tax deductible interest?

2. If not then I assume I should clear all my funds out of the off-set accounts and invest elsewhere, to maximise the tax deductible interest? i.e. ISA

3. As the flat is only in my name can I still use my wife’s tax liability for half of the rent profit? (If we were to get divorced the courts would adjudge that she is entitled to half of it).

4. We are currently persuing a lease extension on the flat, I assume that this is also a legitimate tax deductible expense?

Thanks in advance Al.

fengirl_2

1. You will need to ask your lender for a certificate of interest paid on the mortgage for each tax year. The statements you have are not acceptable for tax purposes.This will only show the actual interest paid on the mortgage.
2. Probably, but take advice.
3. No, because she does not own half of it.
4. The lease payment will be capital and only allowable for CGT purposes.