BTL Remortgaging tax impacts

w068720

Hi

I wonder if someone could answer this question.

I have raised £50k from my house by remortgage as a deposit for a BTL investment.

So I am now paying a higher mortgage cost on my own house to fund the BTL investment, my mortgage has increased by £2400 in the first year

The question is can I add this additional loan cost as offset against the rental income I receive from the flat, and if so for how long, as long as I have the BTL property?

If I can, what rate should I use each year? (the first year it was costing me £2400, but each year it would be different, especially if I continue to remortgage

Thanks

00ec25

Assuming you have a clear (paper) trail showing the purpose of the additional borrowing you took out was to fund the BLT, then you can indeed claim the extra interest on that borrowing as a cost of the rental business. You obviously know you cannot claim any of the capital repayment.

It is a cost of the business so lasts as long as the borrowing or the business does. You simply claim the relevant portion of the interest £cost of your current (or subsequent) mortgage

The restriction in respect of remortgaging is you cannot increase the size of the loan above what was the value of the BLT property on the date you first took out the original extra borrowing

jimmo

Not quite correct.
The key question is the value of the property when it is introduced into the lettings business, not necessarily the purchase price.
See example 2 here.
http://www.hmrc.gov.uk/manuals/bimmanual/BIM45700.htm

w068720

So I've been offsetting this amount each tax year, but now I am going to be moving my main residence and moving to another mortgage company. So I am now a little confused about the how I take into account the £50k I raised for the BTL deposit?

Thanks

CLAPTON

the questions are

what was the value of the property when you first let it?
what's the size of your mortgage?

the interest on the lesser of these amounts can be offset against your rental income

the 50k has no direct bearing on the matter

w068720

Both my house that I live in and the flat are on interest only mortgages, so no capital is involved.

The value of the flat when I first rented it out was £215k i.e. how much I paid and the size of the mortgage was £175k

But it was costing me £2400 per year in remortgage loan interest on my main residence and that is what I have been added to the costs for the tax returns, but with interest rates going up and down the past 5 years that £2400 varies.

But now that I am selling my house and moving and changing mortgage providers what rate should I use to calculate the £50k loan borrowed?

Also the £50k is difficult to clearly see where it originally came from and that it is indeed a loan used to fund the BTL deposit?

Thanks

CLAPTON

you can claim interest on loans up to 215k

the 50k doesn't directly come into it as you can claim the interest on capital up to 215k; presumably one woul.d select the most expensive debt

SomersetSaver

Is is true that you can claim any mortgage interest costs up to the value of a BTL property, even if some of those costs are for the loan on your main residence? I've missed that trick if that's the case...sounds too good to be true!

CLAPTON

SomersetSaver wrote: »

Is is true that you can claim any mortgage interest costs up to the value of a BTL property, even if some of those costs are for the loan on your main residence? I've missed that trick if that's the case...sounds too good to be true!

no that isn't the case

you can claim interest costs on loans up to the value of the property when first let

you may well have missed a trick or two but maybe you didn't seek expert advice

why is that too good to be true?