Finance fees - allowable expense?

Ed-1

If a mortgage is used partly to finance a buy to let purchase property (75%) and partly to finance private home improvements (25%) then 3/4 of the interest on it is an allowable expense against rental profits.

However, can a proportion of the fees also be an allowable expense? Say if there was a £900 arrangement fee added to the loan - is this fee not wholly and exclusively for letting purposes and so not tax deductible at all or can 3/4 of it be tax deductible as with interest?

Same with legal fees: if this mortgage was a remortgage then legal fees can be an allowable expense but only if they were incurred wholly and exclusively for letting purposes - which they weren't here as the mortgage also covered private home improvements.

Dazed_and_confused

You are somewhat out of date regarding rental income and finance costs.

Only 50% of the allowable costs can be claimed as an expense now.

The remaining 50% entitled you t is tax credit off your final tax bill. Although not in all circumstances.

Gov.uk has more detail

Ed-1

Dazed_and_confused wrote: »

You are somewhat out of date regarding rental income and finance costs.

Only 50% of the allowable costs can be claimed as an expense now.

The remaining 50% entitled you t is tax credit off your final tax bill. Although not in all circumstances.

Gov.uk has more detail

As a basic rate taxpayer it all adds up to the same thing.

Dazed_and_confused

Not for all basic rate payers it isn't.

The bottom line is that your taxable profit will be higher and that can affect other things such as Married Couples Allowance. This might not affect everyone but it will some.

And the higher profit arising from not being able to deduct all of the finance costs will no doubt push some basic rate payers into being higher rate payers.

And this can they have a knock on effect to things like Marriage Allowance and amount of the savings nil rate band ,(£500 instead of £1,000).

More people will notice the difference when none of the finance costs are allowable in 18 months.

Ed-1

Dazed_and_confused wrote: »

Not for all basic rate payers it isn't.

The bottom line is that your taxable profit will be higher and that can affect other things such as Married Couples Allowance. This might not affect everyone but it will some.

And the higher profit arising from not being able to deduct all of the finance costs will no doubt push some basic rate payers into being higher rate payers.

And this can they have a knock on effect to things like Marriage Allowance and amount of the savings nil rate band ,(£500 instead of £1,000).

More people will notice the difference when none of the finance costs are allowable in 18 months.

I'm still looking for an answer to my original questions regarding finance fees. Can you take the tax deduction for this?

jimmo

The incidental costs of obtaining finance are allowable in exactly the same way as interest charges so in your case you can claim for 3/4 of the fees.
Whilst I appreciate that, as a basic rate taxpayer, the new finance rules will not affect your tax bill you will need to complete your Tax Return in accordance with them so you may as well get used to them.
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2054

Dazed_and_confused

Unless the op is claiming Married Couple's Allowance (unlikely I know!!).

Ed-1

Dazed_and_confused wrote: »

Unless the op is claiming Married Couple's Allowance (unlikely I know!!).

On the subject of married couples, if the mortgage is in joint names but the let peoperty is only owned by one of the couple then can only half the expenses be deducted?

EDIT: It seems the full expenses can be deducted:

"Joint Loans
Where a husband and wife take out a joint loan but only one spouse uses the loan in a form that meets the qualifying conditions, that spouse would be entitled to full relief on the relevant amount of interest paid, even if the joint liability is satisfied out of a joint account."

https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim10030