Tax relief on rented property

rsbright

I seem to remember reading somewhere that you can take out a mortgage against rented property you already own and claim tax relief, even if the money isn't to be used for work on the property. Can this be true!!

HugoSP

IIRC you can now use rented property to finance further investments in other rented property and claim tax relief.

silvercar

Tis true!

Think of your rented property as a business, by taking out a mortgage you are releasing the capital you lent to that business and so can claim tax relief on the interest paid.

rsbright

Many thanks for responses to my query. Does anyone know whereabouts on the Inland Revenue this info is listed. It seems to be well hidden - I know it's there somewhere! I believe that the money doesn't have to be used to buy another property?

h4nym

Sorry to maybe a cloud on the parade, but my accountant has told me - albeit in passing - that there are rules and limits. I haven't questioned him too deeply on it because it isn't entirely relevant yet, but as I said - he's certainly mentioned it.

Take advice!

H

dunstonh

Surely its not tax relief either. It would be an allowable expense?

silvercar

dunstonh wrote:

Surely its not tax relief either. It would be an allowable expense?

your "relieved" from paying tax on the profit you make, by the expenses that are allowable.

inland revenue guidance and even worked examples here:

http://www.hmrc.gov.uk/manuals/bimmanual/BIM45700.htm

Tassotti

Remember though that you can only claim relief on the interest up to the value of the property when it first entered your letting business.

clutton_2

its my understanding that if you use the remortgaged money for the property business (either as deposits for more purchases, or improving your current property for example) - that the interest payable on the remortgage loan is a deductible/allowable expense. if you remortgage and spend those funds on a holiday it is not a legitimate business expense. If the IR do an investigation on your business you will need to have a fool proof paper trail as to how you spent the money.

silvercar

clutton, I'm going to disagree with that. I understand that you gave your business a property of value X. It (ie the business) then takes on a mortgage to return to you the value X. This ties in with the limit on the interest being allowed as an expense of the value of the property when you started letting it.

rsbright

Silvercar's reply ties in with my understanding of the rules but I still can't track down the relevant bit on the Revenue website. I'll keep digging til I find it and will post the details if I ever get there!