Interst Only or Repayment Mortgage Tax Implications ?

1jacks64

I am looking to buy a house and rent it out. I am going to take out a buy to let mortgage to do this. What I would like to know is, is it better to have an interest only or a repayment mortgage from a tax point of view?

I understand that you can rent out a house and claim tax relief on your tax return for the interest that you pay on your mortgage. My father told me that you can only claim tax relief on the interst on your mortgage only if the mortgage is on an interst only basis. Can anyone confirm whether my father is right or wrong on this? and could anyone confirm if there are any tax implications to having an interest only or repayment mortgage or whether it makes no difference from the tax man's point of view.

(I am a PAYE basic rate tax payer if this makes any difference and i do not complete tax returns currently.)

silvercar

whether the mortgage is interest only or repayment you can claim tax relief on the interest element of the mortgage repayments. For an interest only mortgage this is obviously the total mortgage repayment, for a repayment mortgage it forms the bulk in the first few years. the slight complication is that you will have to refer to your annual mortgage statement (or similar) to find out how much of your repayments were interest.

You will need to complete a tax return to declare to the revenue the profit (!) you are making on the letting business.