WHO IS RIGHT? Changing To Buy To Let Mortgage??

penniestopounds_3

I have a mortgage (which I have had for 4yrs) on my own house which I had hoped to transfer on to a second small house which I was able to buy outright early this year, without increasing my present mortgage.

The house is being rented out at present I was told recently that if I had BTL mortgage on it I could claim tax relief on the interest of the mortgage.

However one tax officer said that was not allowed as I had already purchased property outright and the 'loan' would not be for that purpose now but another officer said it was ok.
Anyone out there who knows which tax officer is correct?

Would it be beneficial anyway to have BTL mortgage as I understand I cannot transfer my present mortgage from my house to another unless I am in residence??

mlz1413

I believe you can claim the interest on the loan used to pay for the purchase of the property.

So if you re-mortgaged your current house to enable you to buy the let house then that can be proved as the loan was for the purpose of the purchase and so you can claim the interest against rental income.

But I think what you are saying is you bought a house outright with cash to let and now wish to allocate a mortgage to the let house to reduce tax.

Go and have a chat with a financial / tax accountant and ask the best way forward.

mlz1413

sjcollett could you clarify what a broker is?

Also when you say transfer to a BTL do you mean the mortgage on current house?

penniestopounds_3

My problem seems to be that I did not need to re-mortgage on my current house to purchase the smaller one and tax officer and accountant have said I can have BTL mortgage BUT cannot claim back the tax relief on the interest. Only wear& tear,letting agent's fees,service charges etc.

mlz1413

If you buy another property or even sell this one and buy another make sure have the finance is in place to buy with mortgage / loan prior to completion then you can claim the interest against income.

remember you can claim any repairs during tenancy and re-decoration. I know its a bit late but I'd pay a tax accountant for an hours advise and ensure you make the best of your situation.

penniestopounds_3

Thank you mlz1413.

I know that I can claim all the other things and I have a good broker and accountant. However buying a property outright,as a cash buyer, is not necessarily the best way and I bought on impulse, so unlike my normal sensible self. But I have a great almost new little house.

My main query was out of the two tax officers, giving different advice, within the GB tax offices who was right and what would happen if someone else took the advice from officer who was wrong and end up with a problem.

If the officers within the tax offices give differing advice, then heaven help us all!!

silvercar

You should be thinking of your let property as a business. You have loaned "the business" the money to buy the property. If you didn't have that business you would have the money to pay off your mortgage, so your mortgage is indirectly an expense of the business. The mortgage interest (upto the value of the let property when first let) is an allowable expense against the rental income.

A lot of people fund a BTL with a BTL mortgage on the let property and by increasing their home mortgage to fund the deposit. Both the interest on the BTL mortgage and the interest on the increase on the home mortgage are allowable expenses. There is no rule that says that the mortgage has to be secured on the property concerned.

silvercar

My main query was out of the two tax officers, giving different advice, within the GB tax offices who was right and what would happen if someone else took the advice from officer who was wrong and end up with a problem

Advie on the tax board from an ex tax inspector is that you cannot rely on any advice unless it has been given to you and in writing.

mlz1413

penniestopounds wrote: »

Thank you mlz1413.

My main query was out of the two tax officers, giving different advice, within the GB tax offices who was right and what would happen if someone else took the advice from officer who was wrong and end up with a problem.

If the officers within the tax offices give differing advice, then heaven help us all!!

I think you can get differing advise if you word the question differently, so I would agree with Silvercar unless you have evidence of your question and answer it would be hard to prove what you asked.

poppysarah

Advice from the tax office in writing is the one to follow.

dougk_2

I guess you could take out a mortgage on the let property with a BTL mortgage and use the money to pay off your normal mortgage. That way it is clear the mortgage (interest) is on the BTL property.