Claiming buy to let interest on tax return if I have briefly lived in property

AlexMac

hostie wrote: »

The reason I am asking here is that the accountant seems to know less about this stuff than I do. ... She was pretty clueless to be honest. ...What I need is help from people who already have two or three properties and are slightly further ahead than me.

Sack the accountant and fillin your own tax return (unless you need them for other self-employed income or you have complex tax affairs! You only need to put a few lines of summary income and expenditure on your self-assessment; it's not rocket science; takes me a couple of hours each year.

And back to the OP; I'm doing exactly what you ask about; I have a pair of BTLs; one financed from a small added loan, which because it was taken out against my 'primary residence' is on a stonkingly low rate of interest. So as someone said, above, my view is that it's what you use the money for that counts; not which property its secured against. And looked at another way, I'm saving the taxman dosh as I claim less relief on the lower interest rate

booksurr

hostie wrote: »

My question is about claiming the interest on the mortgage as a deduction on my tax return. I was told by an accountant that it is the use of the money (i.e. the flat it was spent on and not the house it was secured on) that dictates whether the interest payments on it can be claimed.

your accountant is wrong, Jennifernil is correct
in technical terms you have "withdrawn capital" from the house and used that to purchase another property.

the other property can be used to live in or to rent out, it makes no difference at all, what you told your solicitor is therefore utterly irrelevant

you fall exactly into example 2 and as stated by anselld you can claim mortgage interest up to the value of the house when it was first let. NOTE carefully that is the value of the original mortgage, not the remortgage if the latter is for a greater amount.

hostie

Thank you very much for your replies, especially to Jennifernill for the link.
I'm a bit confused about what you say booksurr about first and second mortgages.
I lived in the property for a while (at that point it was owned by my dad), then I rented it out to friends and dad did the tax return, then he gifted it to me and I continued renting it and doing the tax return, then I took a buy to let mortgage out on it. So there was no original mortgage when I mortgaged it.
Do I still fall into example two in Jennifernill's link? And can I therefore claim the interest payments on the buy to let mortgage in my tax return?

silvercar

It is the value of the property when you first let it that is important.

When your father owned it, it was his business. Once ownership became yours, it is your business. it is that value that you use in your calculations.

(Market value not what you paid your father as you are connected people.)