Interest Only Mortgage Deductable Allowance?

adamski911

Hi,
I am currently working on a tax return for a friend who has a rented property and is using a interest only mortgage against it.
I assumed that they could deduct the full amount they repay each month against it but when I have checked back through their books from previous years I have noticed that they are not deducting the full amount.
I need to sit down with them and try to find out why but if anyone can shed any light as to why this might be would be appreciated?

Thanks

CLAPTON

the interest can be deducted up to the value of the property when it was first let out.
maybe they have increased the mortgage to more than this initial value.

adamski911

Hi,
So it may be they remortgaged and used the money for renovations possibly?

Thanks

lisa76

My understanding of this (and I am just doing my husbands first self assessment tax return and it includes a rented property) was that you include all of the rental income but only deduct the interest on the mortgage payments - for example if you paid £700 per month and the interest on that was £200 you would only claim the £200. So my husband pays a lot more on his mortgage than he gets in rental income, so we are showing a loss.
If I am wrong could someone tell me as this could make a huge difference to us!

CLAPTON

lisa76 wrote: »

My understanding of this (and I am just doing my husbands first self assessment tax return and it includes a rented property) was that you include all of the rental income but only deduct the interest on the mortgage payments - for example if you paid £700 per month and the interest on that was £200 you would only claim the £200. So my husband pays a lot more on his mortgage than he gets in rental income, so we are showing a loss.
If I am wrong could someone tell me as this could make a huge difference to us!

in your example then yes you could only claim the 200 interest part of the mortgage payment as a business expense.

in the OP's case however, he says it's an interest only mortgage