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

penniestopounds_3

silvercar wrote: »

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.

It is ok to claim tax relief on the interest on a mortgage to finance a BTL property but as I already own the property outright , if I raised mortgage on it to buy my own residential property I believe the revenue would deem that to be a tax avoidance and is a criminal offence.

penniestopounds_3

dougk wrote: »

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.

Yes that is what I intend to do when I find the best product deal on the BTL mortgages, but at end of day if you buy a property outright or partially cash you cannot then change to a BTL mortgage and claim the tax relief on the interest. The tax office and government have it and us all stitched up.

Trollfever

As you will be running a business, advice from HMR&C can be found here:

http://www.hmrc.gov.uk/startingup/index.htm

silvercar

penniestopounds wrote: »

Yes that is what I intend to do when I find the best product deal on the BTL mortgages, but at end of day if you buy a property outright or partially cash you cannot then change to a BTL mortgage and claim the tax relief on the interest. The tax office and government have it and us all stitched up.

I disagree, your BTL business would be repaying you the money that you loaned the BTL business when you bought the property.

chucky

silvercar wrote: »

I disagree, your BTL business would be repaying you the money that you loaned the BTL business when you bought the property.

the only downside here is that you would pay tax on the interest that you receive from your BTL business on your personal income.

i'm pretty sure that this is the case but feel free to check this out.

Rick62

No wonder you're getting different advice. I'm confused. I thought you said that you do already have a mortgage on the property that is rented out?

If you already have a mortgage on the property then you can claim the cost of this mortgage, or of any like for like mortgage (or increased to spend on that same property, but not if additional for personal use). It doesn't matter if the mortgage is called a 'BTL' mortgage or not.

penniestopounds_3

Rick62 wrote: »

No wonder you're getting different advice. I'm confused. I thought you said that you do already have a mortgage on the property that is rented out?

If you already have a mortgage on the property then you can claim the cost of this mortgage, or of any like for like mortgage (or increased to spend on that same property, but not if additional for personal use). It doesn't matter if the mortgage is called a 'BTL' mortgage or not.

This was my initial post
"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? "

My query was just about tax relief on the interest of a BTL but you will see from my other replies to members I am unable to change to obtain tax relief as now advised by my accountant,(who was away for my initial query)as certain advice would be deemed as illegal.

penniestopounds_3

silvercar wrote: »

I disagree, your BTL business would be repaying you the money that you loaned the BTL business when you bought the property.

Thanks but my accountant says not allowed to do that.

Rick62

OK, sorry, so the house that you let is the second one that you bought outright. In that case i think your accountant is right, if you have no mortgage on the property you can't then later take out a mortgage, use the proceeds for personal use and get tax relief.

If you had originally bought with a mortgage then that would have been deductable.

penniestopounds_3

Rick62 wrote: »

OK, sorry, so the house that you let is the second one that you bought outright. In that case i think your accountant is right, if you have no mortgage on the property you can't then later take out a mortgage, use the proceeds for personal use and get tax relief.

If you had originally bought with a mortgage then that would have been deductable.

Thank you for agreeing with my accountant.
Now I just have to decide which mortgage product to change to. I am probably going to have a BTL (without claiming tax relief!!) for my second house as I wish to keep renting it out. Then I'll sell my main house (which will then be free of a mortgage, probably move abroad.