Tax advice - rental property

Pigmy

Hi,

I'd be greatful for any advice - I have resently bought a house to rent out. I have funded it through my residential mortgage (it is an offset mortgage at 1% above base rate which I had paid off). So I drew down the value of the rental property and am now renting it out.

However, when it comes to my tax return, can I offset the interest on the mortgage loan against income for the rental property. Ethically it seems a fair thing to do, however I get the uneasy feeling that the tax man will see it as 2 separate properties and therefore not interchangeable!

Any advice or ideas on avoiding additional tax costs greatly appreciated!

fengirl_2

Yes, you can offset the interest paid on the mortgage against the rental income. You will need to ask your lender for a certificate of interest paid annually to enable you to make accurate returns.

Seanymph

which property is the mortgage raised against? The rental property, or the one you are resident in?

James_Trimby

Hi

DONT fall into the common misconception that the loan has to be secured on the property you are renting IT DOES NOT what you need to ensure is that the trail from the monies borrowed for the purchase is clear and as short as possible (ie put it in a building society for a month before using it probably messes up your claim) ALso if you have any spare money for a while put it in your savings pot DO NOT put it against your loan account as if/when you reborrow it that part of the loan will not be eligible for tax relief as monies now borrowed for a different purpose.

I have come accros other accountants advising that loans are disallowed if not sucured on the rental property This is not correct.