Buy To Let Mortgage (Interest Only) - Overpaying and Tax Implications?

pinklady21

Meeper wrote: »

In addition, even if you pay off the mortgage on the BTL property, you can still offset interest from your residential mortgage against the rental income if you so desire. Interest being offset against the rental income doesn't necessarily need to come from a mortgage secured on the rental property.

Really?
Would the tax man not want some evidence that the mortgage was used to purchase the rental property rather than the residential one?

Could you therefore offset more than one mortgage against the BTL profits? ie both the BTL interest and the interest on your residential mortgage?

holly_hobby

If you have released equity from other property(s) to fund the purchase of the BTL, and there is a clear and transparent audit trail between the 2 transactions - then yes this part of the mge on another residence(s) may also be offset against the rental income on the BTL as a quantified operating cost.

Hope this helps

Holly

LarryHarry

We have just purchased my daughters house on a BTL mortgage and was wondering what would be the best way to cover the mortgage repayment at the end of the term please??

Any suggestions would be appreciated - as we're new at being Landlords

holly_hobby

LarryHarry wrote: »

We have just purchased my daughters house on a BTL mortgage and was wondering what would be the best way to cover the mortgage repayment at the end of the term please??

Any suggestions would be appreciated - as we're new at being Landlords

Assuming interest only, most tax efficient is via ISAs & pension (25% tax free lump sum subject to lifetime regs) , obviously contributions shall need to be sufficient to acquire the required fund, and ISAs may replaced/withdrawn by the Gov in future yrs as we saw with TESSAs.

Other tax efficient methods are Venture Capital Trusts and/or Enterprise Investment Schemes - although these are more suited to an experienced/adventerous investor who understands the risks associated with the underlying investments - and may not be suitable for the delivery of a defined sum at a defined time. But are discussed in the realms of tax efficient investment vehicles.

Tax liable investments (os of ISA wrapper), stocks, shares, bonds, gilts etc .. etc... primarily placed in the names of those who are basic tax payers and not using whole of their PA, before held in the names of those exposed to higher & upper (50%) tax liabilty.

Or ...the obvious .. switch partly or wholly to C&I ... or ... sell the property (do make sure you have a contingency fund to take account of a fall in property prices due to prevailing market conditions at the time of sale).

You need to speak to a financial adviser, to fully discuss the most suitable repayment method for you and your risk profile.

Hope this helps get the ball rolling ...

Holly

Thrugelmir

unmissable wrote: »

I would rather be profitable and pay tax, than pay interest and 'beat' the tax man by pretending I am operating at a loss.

If you operate at a loss for an extended time frame then down the road you would be heading for a tax investigation. As no sane business person intentionally has that objective.

Thrugelmir

LarryHarry wrote: »

We have just purchased my daughters house on a BTL mortgage and was wondering what would be the best way to cover the mortgage repayment at the end of the term please??

Any suggestions would be appreciated - as we're new at being Landlords

Don't take this the wrong way. As rather late in the day to consider this critical factor after purchasing the property. Did you seek professional advice before jumping in?

Anyway.

Will the property generate an after tax profit on annual basis?

If so how much and how much mortgage do you need to clear down.

getmore4less

LarryHarry wrote: »

We have just purchased my daughters house on a BTL mortgage and was wondering what would be the best way to cover the mortgage repayment at the end of the term please??

Any suggestions would be appreciated - as we're new at being Landlords

In the absence of any cash appearing from nowhere(inheritance lottery win) there are only 2 ways

Sell up and pay it off or save up money to pay off the debt.

If saving how much will depend on the investment return you get.

Overpaying is just saving using paying down debt as the investment vehicle.

Plan to save the extra it would be for a repayment mortgage and review returns every few years to see if you need to adjust.