BTL MORTGAGE TO REDUCE TAX or NOT?

le_loup

danlondonuk wrote: »

Surley if I earn £9600 in rent and don't have any mortage owing on the property I am going to LOOSE alot of the income in TAX.

Oh dear! You do really need to read the replies people have taken their time to give you.

de1amo

noodle wrote: »

But you're confident in the economy of somewhere offering you this 9.3% interest? You've heard of Iceland, I presume?

]İts turkey with a strong controlled economy.
İ have homes, business and investments abroad. i just see the uk as a source of cheap interest rates to build a better life -out there it is 12pc for a mortgage hence savings rates are high. i feel more confident there than i do in the uk economy with its huge deficite.

dazza.mk

CLAPTON wrote: »

85,000 at 6% interest rate = 5,100

Whoops true only looked at it quickly

dazza.mk

danlondonuk wrote: »

(MANY THANKS TO ALL THOSE WHO HAVE REPLIED)
Also am I able to deduct first painting,decoration, or double glazing
in preparation for my first rental ? Or can this only be claimed after a year or so renting?

Are all mortagge application,valuation,survey and solicitors fees tax deductable ?

http://www.hmrc.gov.uk/worksheets/sa105-notes.pdf

I'd say that you could probably claim the painting costs
Double Glazing :- Can't claim as it would be a capital improvement

Re: Mortgage Fees:
"Box 7 Loan interest and other financial costs
Include:
• the costs of obtaining a loan or an alternative finance arrangement to buy a property that you let
• any interest on such a loan or alternative finance payments."

danlondonuk

Le Loup - ''Oh dear! You do really need to read the replies people have taken their time to give you''.


Thank you for that somewhat patronising superior attitude unlike your obvious self I am on here seeking advice from much more business TAX savvy contributors than myself, you on the other hand obviously prefer to judge and criticise, many thanks for your time and input to which I am sure you found valuable!

TrickyDicky101

While taking the mortgage would reduce your tax bill (as your income from renting out your property would be reduced) you would be worse off in cash terms as you would be paying out a lot of cash to finance the interest on the mortgage. It thus only has benefit if you have a use for the mortgage money advanced eg investment in another property/buying that Ferrari you've always wanted etc etc

le_loup

danlondonuk wrote: »

I am on here seeking advice from much more business TAX savvy contributors than myself

If that's the case, it's a shame you didn't read the answers.

00ec25

le_loup wrote: »

If that's the case, it's a shame you didn't read the answers.

the OP asked exactly the same question 6 days ago both on this board and the house buying board, he got the same answers then as now,

https://forums.moneysavingexpert.com/discussion/3239050=

https://forums.moneysavingexpert.com/discussion/3239092=

you will reduce the amount of tax you have to pay by taking out a mortgage but if you borrow to create the tax deduction you must invest that money at an after tax rate greater than what you are paying on your borrowings, otherwise you are losing money

seems this is a difficult concept to understand

noodle

danlondonuk wrote: »

Le Loup - ''Oh dear! You do really need to read the replies people have taken their time to give you''.


Thank you for that somewhat patronising superior attitude unlike your obvious self I am on here seeking advice from much more business TAX savvy contributors than myself, you on the other hand obviously prefer to judge and criticise, many thanks for your time and input to which I am sure you found valuable!

With respect, the comment that Le Loup responded to indicated that you had entirely failed to read and/or grasp what other posters had said. There is a fundamental flaw in your logic.. which is forgivable in the first instance... but less so after it's been clearly and politely explained to you.

But here it is again...

YES.. if you get a mortgage then you can deduct the interest from your rental income and pay less tax. BUT the cost to you of that interest will be significantly more than the tax that you save... are you with me so far?.. SO the plan only works if you can use the money that you borrow to generate sufficient income, after the tax you will then pay on that income, to cover the shortfall.

heretolearn_2

One thing you are forgetting while looking at all this:, yes, your mortgage interest is an allowable expense if you rent a property. And that reduces your tax bill. But you are forgetting that you also have to make those mortgage repayments back to the bank. You pay it out on one side and get it back on the other and they cancel each other out. Getting a mortgage will NOT reduce the overall amount you pay out. You will pay less tax, but you are also giving money to the bank. Take your pick, give it to the HMRC or the bank, but there isn't a way you are going to rent your flat out and keep all the money.

TAX: Allowable expenses
The expenses you can deduct from letting income (unless it's under the Rent a Room scheme) include:
letting agent's fees
legal fees for lets of a year or less, or for renewing a lease for less than 50 years
accountant's fees
buildings and contents insurance
interest on property loans
maintenance and repairs to the property (but not improvements)
utility bills (like gas, water, electricity)
rent, ground rent, service charges
Council Tax
services you pay for, like cleaning or gardening
other direct costs of letting the property, like phone calls, stationery, advertising