Tax relief on rented property

Alan_M_2

silvercar wrote:

You wouldn't be making drawings, you would be repaying the loans that the business took from you to buy the property in the first place.

The important thing you've misunderstood here is the therm "taking capital from the business" if this capital is to be used for anything other than business and it's taken by you personally, it is drawings.

If your borrowing money to invest elswhere in the buiness you are not removing capital from the business, your reinvesting it in other businesses.

Capital removed for any personal use whatsoever, no matter how it's sourced is classed as drawings.

Alan_M_2

silvercar wrote:

same thing 3 ways:

1. In order to buy a property to let out, I get a mortgage on it. The mortgage interest on this property is allowable for tax.

2. same property but I can get a better mortgage deal if I secure the mortgage on my residential home. The purpose of the loan is to fund the letting business. The mortgage interest is allowable for tax.

3. I happen to own the property that I am now going to let out. I obtain a mortgage on it (or a loan). The purpose of the loan is to fund the letting business. The mortgage interest is allowable for tax. I can do what I like with this loan money, as it is reimbursing me for the money I have put in the business.

In none of these circumstances are you remiving capital from the business, so in that respect you are correct. You are simply diversifing, the letting isn't another business, it's part of your existing business just simply a diversification.

Don't make the mistake of treating it as a seperate business particualrly if either of these are limited companies, otherwise you'll find yourself liable for corporation taxes twice, assuming the investments are making enough.

rsbright

This quote from an article on Equity Release for landlords.
'Equity release has not been available to landlords on their 'Let' properties. Until now, these schemes were only available on the main domestic residence and whilst landlords can (and often do) raise capital on let properties via the use of a remortgage or further advance, they still have to pay interest on the loan.
Don't forget that under the new tax rules these can often qualify for tax relief on the interest - even if the money is used for other purposes'
This article mentioned 'New Life Mortgages' who seem to have entered this market fairly recently.