Mortgage tax relief

zougathefist

Hello,

I (like so many others apparently) have been forced to let my owned property and rent elsewhere as I cannot sell. I do not make any profit from the rental as it is about£50 less per month than the mortgage payments.

I have been led to believe that I can claim tax relief on the interest payments and on any costs that are incurred as a result of letting out the property.

I have a consenmt to let from my lender (northern Rock) that was £250 for indefinite permission and it is not a buy to let mortgage.

Is it possible to claim relief and what is the most cost efficient way to go about this?

Thanks

ZtF

Gwhiz

The only tax relief is that you can deduct the mortgage INTEREST from the rent received to reduce your profit. In your situation it sounds lke no profit exists so nothing you can really deduct against.

TrickyDicky101

It rather depends on if the mortgage is interest only or repayment - if repayment then a proportion of the monthly mortgage payment will be against capital. If this exceeds the shortfall between rental income and mortgage payment (£50 per OP) then the OP does have income from the property which needs to be accounted for on his/her tax return (although may be wiped out once all the allowable expenses have been deducted).

00ec25

you pay tax on the net profit you make after deducting eligible costs ("relief" is not the correct term to use in this context), therefore your £50 pm difference is not your net profit/loss if that includes the whole of the mortgage cost (ie capital as well as interest)

as you have correctly heard it is only the interest which is eligible in respect of your mortgage cost. There are however loads of other eligible costs which you will of course have incurred being a responsible LL that has met all their obligations

the directgov websiite provides a simple overview on tax here
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017814

and provides general advice on renting obligation here
http://www.direct.gov.uk/en/HomeAndCommunity/Privaterenting/RentingOutYourProperty/DG_189124

mlz1413

Agree with above it sounds like no profit so there is nothing to claim relief from.

have a look at direct.gov website and search rental income, this will give you the basics of what you can claim as expenses against your income.

Did you keep the receipts for the gas safety certificate and any smoke alarms you installed?

zougathefist

So if I understand this,

I cannot claim any 'relief' but I should be able to claim back expenses (such as agent fees).

I have a full repayment mortgage that is about £573 whilst the rental income is £525 so over a full year I would lose approx £576. I pay 10% in agent fees p/m which is £630 P.A. plus the costs of maintainence, gas/electricity checks and insurance.

So only if I was making a profit from the rent would I be able to claim these costs from the income before calculating the tax I needed to pay?

P.S.

Yes I have receipts for all checks/work carried out

Since I make no profit I cannot therefore claim anything back?

mlz1413

No you haven't understood correctly!

you pay a REPAYMENT mortgage and can only claim the INTEREST part of that fee.

Please advise what the interest only figure is and then have a read through the links given.

Gwhiz

Rent - mortgage interest - LA fees - 10% of rent (if fully furnished) - any other allowable deductibles = profit.

If profit = +ve then tax may be payable

If profit = -ve then no tax to pay.

00ec25

zougathefist wrote: »

So if I understand this,

I cannot claim any 'relief' but I should be able to claim back expenses (such as agent fees).

I have a full repayment mortgage that is about £573 whilst the rental income is £525 so over a full year I would lose approx £576.
in financial terms yes your mortgage payments are more than your income received but in tax terms only the interest element is allowed. You will need to get the breakdown of interst and capital from your mortgage statement / write to the lender and ask them


I pay 10% in agent fees p/m which is £630 P.A. plus the costs of maintainence, gas/electricity checks and insurance.

these are eleigible costs

So only if I was making a profit from the rent would I be able to claim these costs from the income before calculating the tax I needed to pay?

not quite understood it correctly, the start point is to do the maths to establisgh ifyou are making a profit - you "claim", ie you include in your caluclation, these costs to determine arrive at the profit (loss in your case)

your rental income is £6,300 per year, you deduct your costs from this (interest, agency fee, 10% wear & tear allowance - assuming its been let as a furnished property, gas checks etc, buildings insurance premium from your LL policy)
on this basis you will make a loss and therefore will not need to pay any tax

Since I make no profit I cannot therefore claim anything back?

correct - you cannot claim back anything. Think about it this way, why do you think the taxpayer should subsidise your loss making business by refunding tax that you have not had to pay in the fist place?
Your position is you will not have to pay tax on the £6,300 you have received because you will have "spent" all that income on eligible costs. You have therefore received £6,300 tax free

see above
your end outcome is you are making a loss. This loss CANNOT be offset against any other income your get (eg your employment income) but it can be carried forward indefinitely to be offset against any future profits you make from property letting

BTW as your total income before costs is <£10,000 pa or your net profit is <£2,500 you are not required to do a full SA tax return, but you will of course need to keep records of your income and expenses to support your loss claim which you can make by letter to HMRC

poppysarah

zougathefist wrote: »

Hello,

I (like so many others apparently) have been forced to let my owned property and rent elsewhere as I cannot sell.

Not forced.
it's a choice.

If you don't want to sell at a price that people can afford to buy then there you go.

Typhoon2000

poppysarah wrote: »

Not forced.
it's a choice.

If you don't want to sell at a price that people can afford to buy then there you go.

I think he means if he were to sell at a lower price he wouldn't be able to settle his mortagage in full. So he is 'forced' to let it (probably to those people you mention who cant afford to buy at the price he wants to sell at).