Declaring mortgage income help!

Steer100

Hi there,

I have recently purchased a little flat that I have rented out (I still live at home, my plan is to move in a few years time after the majority of the mortgage is paid off).

My job is mainly commission so I was unable to get a mortgage. My Dad helped out and basically extended his mortgage and I pay him the exact amount of the monthly mortgage repayment.

My question is, will HMRC take this into consideration (that the rent doesn't cover my mortgage repayments) or because it is not directly my own mortgage and essentially I bought it with cash (albeit from my Dad's mortgage) will they see it as 100% profitable income.

I would really really appreciate any help and advice.

Thankyou

Thrugelmir

The rental income net of expenses is taxable. Loan repayments are in themselves not tax deductible though the interest element is. Ideally you should have a formal legal agreement with your father detailing the terms of the loan. This then would provide the HMRC with tangible evidence.

Interest your father receives is in itself taxable.

Suggest you seek some proper advice. As the consequences could prove somewhat costly if you don't.

kingstreet

Steer100 wrote: »

Hi there,

I have recently purchased a little flat that I have rented out (I still live at home, my plan is to move in a few years time after the majority of the mortgage is paid off).

My job is mainly commission so I was unable to get a mortgage. My Dad helped out and basically extended his mortgage and I pay him the exact amount of the monthly mortgage repayment.

My question is, will HMRC take this into consideration (that the rent doesn't cover my mortgage repayments) or because it is not directly my own mortgage and essentially I bought it with cash (albeit from my Dad's mortgage) will they see it as 100% profitable income.

I would really really appreciate any help and advice.

Thankyou

The loan you use to finance the business does not have to be secured on a business asset for the interest to be treated as a trading expense.

Just make sure if HMRC call you in you can demonstrate how you borrowed the funds. if you pay no interest to your father, your loan cost for tax purposes is £0.

Capital repayments are not an expense for tax purposes.

Steer100

Thrugelmir wrote: »

The rental income net of expenses is taxable. Loan repayments are in themselves not tax deductible though the interest element is. Ideally you should have a formal legal agreement with your father detailing the terms of the loan. This then would provide the HMRC with tangible evidence.

Interest your father receives is in itself taxable.

Suggest you seek some proper advice. As the consequences could prove somewhat costly if you don't.

That is really helpful, I will do - Thank you very much :beer: