Repayment Vs Interest only - TAX Help!

GeddyMortgage

Hello,

Recently accepted for a remortgage on one of my BTL properties. So far i've always had this property on a straight forward repayment mortgage. And Paying tax on the earnings from rent than exceed the mortgage payments, per calendar year. All standard stuff.

However, I'm looking at the more flexible option of going onto interest only (with the option to overpay 10% per year).


My question is that; IF I decided to do this. Even though i'd be paying that extra £300pcm back into the mortgage as an overpayment. Would I have to pay more income tax overall? or would it be exactly the same? as paying a mortgage with capital and interest and using the interest as a tax deduction?

thanks for your help & advice.

GeddyM

silvercar

You should only ever have been claiming the interest as an expense of your rental business. I fear you have been under declaring your tax liability up to now.

TrickyDicky101

Hi

You can ONLY claim an expense for tax purposes on the interest element of your current mortgage payments - so from what you've said above you have been under-declaring your taxable profit as you have been claiming the full repayment amount against tax.

I suggest you engage an accountant asap to quantify your historic tax liability and contact HMRC to come clean - otherwise it may bite you much more painfully when HMRC find out in the future.

GeddyMortgage

Cheers, makes sense. I havent had these for longer than one tax year yet, so that is actually really information. Thanks for letting me know that.

It also answered my question, thanks all!

Thrugelmir

A useful guide.

http://www.hmrc.gov.uk/courses/syob3/new_letting/HTML/new_letting_menu.html?utm_source=Auto-SA-New-Landlord&utm_campaign=hmrc-let-property-sept-15&utm_medium=URL&utm_content=educational

If in doubt consult an accountant to get you started and explain the basics.

Edi81

Crikey. You need to check EVERYTHING in relation to letting a property.

Have you followed all rules and regulations? Sounds as though the tax issue may be the least of your worries!