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Poised for BTL but how does Tax relief work?
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you could do with an accountant, yes.
You don't need a business name though...you can just declare this as an income on a tax return, you don't need to set up a whole business or declare yourself self-employed for it.Cash not ash from January 2nd 2011: £2565.:j
OU student: A103 , A215 , A316 all done. Currently A230 all leading to an English Literature degree.
Any advice given is as an individual, not as a representative of my firm.0 -
One last thing (I think), being that the interest paid (not percentage rate) on the mortgage is much more in the early stages of a repayment mortgage, will this be taken into account for tax relief?
E.g. If I get a £50,000 loan at 4.5%, while I owe that much, the portion of interest in my monthly payment will be much greater than the capital until I've paid off quite a bit more of the capital off.
If this is the case, it will make the entry into BTL a bit easier.
I've been looking at agent services and some seem to offer some of the things I have listed in my calcs, so my prospects are looking a little better right now.
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I've not read the links in detail yet, but I will, as I want to make sure I go into this at least covering my costs, with the long term goal of paying it all off and having a bit extra for my pension.
The classic BTL investors mistake.E.g. If I get a £50,000 loan at 4.5%, while I owe that much, the portion of interest in my monthly payment will be much greater than the capital until I've paid off quite a bit more of the capital off.
As the interest paid reduces. Then more income becomes taxable. The capital element of the mortgage is paid from after tax income.
The heydays of BTL were built on capital appreciation. Hence why "BTL" was not a common investment prior to Bradford & Bingley creating the mortgage product back in 1998.0 -
Thrugelmir: Can you elaborate on why its a mistake to take this view?0
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OP, Can you please stop asking about 'tax relief'. It's not the right term as has been pointed out and it's causing confusion both to us and to you, I think.
What is deductable off the rental income is the interest of the mortgage. The exact amount you have paid that year. The mortgage company will send you an annual certificate/statement showing how much interest was paid, and this is what you need to complete your self assessment. What the % rate is, and what type of mortgage it is, whether the amount of % changes each year or is fixed, makes no difference to the HMRC. You'll have to work out your own figures to compare mortgages and find which one works best for you overall.Cash not ash from January 2nd 2011: £2565.:j
OU student: A103 , A215 , A316 all done. Currently A230 all leading to an English Literature degree.
Any advice given is as an individual, not as a representative of my firm.0 -
heretolearn: I am a newbie when it comes to this so if I get it wrong, I'm all ears to what the correct answers are.
Could you be kind enough to tell me what is it called when you deduct mortgate interest\agent fees etc from the rental income to calculate what portion is eligable for tax?
Must admit I Googled it and came to the conclusion of it being called tax relief.0 -
Could you be kind enough to tell me what is it called when you deduct mortgate interest\agent fees etc from the rental income to calculate what portion is eligable for tax?
Must admit I Googled it and came to the conclusion of it being called tax relief.
The HMRC guide that I pointed you toward at post #14 refers to it as "Deductions and Allowances" - it's a link in the last line of the post.
It also outlines a number of 'reliefs' which are available, such as the 'Rent a Room' scheme, and others - non of which would appear to apply to you.
You did read it, didn't you?0
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