Rental Property and Mortgage interest relief

m0nkmaster

Hi,

I am doing my tax return for the year 2018/19 (a little late I know!) and as well as being full time employed I also have a rental property generating a small amount of income.

As some will know, the tax you pay for a rental property income is based on profit after deductible costs. One of the costs you can deduct was interest paid on any mortgage/lending for the property.

This is now being phased out over the next few years thanks to George Osborne. As it's being gradually phased out, for 2018/19 you can deduct 50% of the mortgage interest from your rental income. But then, to offset this (partially), you can claim 'mortgage interest relief' which I won't go into in detail but it's basically you can deduct 20% of the interest paid from your rental mortgage after calculating your tax bill.

Anyhoo, I've been filing a tax return for quite a few years now and I'm quite comfortable with it, however, I can't work out where I should put my 'mortgage interest relief' figure in. The self-assessment form doesn't seem to have an option for this anywhere.

So, whilst I'm not asking for tax advice, I'm purely asking "Does anyone know where on the Self-assessment form I should claim the 'mortgage interest relief'?

I hope that makes sense :-)

00ec25

did you not read the notes on how to fill out the tax return?
https://www.gov.uk/government/publications/self-assessment-uk-property-sa105

For the 2018 to 2019 tax year, you can only claim 50% of the cost of getting a loan, or alternative finance to buy a residential property that you let, and 50% of any interest on such a loan or alternative finance payments.
For example, if you incurred £4,000 in interest on such a loan:
• include £2,000 (50% of £4,000) in box 26 (or
box 29)
• put £2,000 (50% of £4,000) in box 44 – this
will be used to calculate a reduction in your
Income Tax

you do not claim "mortgage interest relief", you do what I have quoted above, and the system will do the calculation for you

m0nkmaster

I did wonder if HMRC were calculating it in the background. Shame, I wonder why my online tax calculation isn't what I thought it should be (by the amount I'd be claiming in mortgage interest relief)

No I haven't seen those notes before, I've read around it lots and used the advice and notes regarding completing the online form. I use the online form to submit my tax return, I've never done a paper return.

Thanks for the speedy reply 00ec25 :-) However, the don't see how they say anything about mortgage interest relief. When I get to the page showing how they've worked out my tax (on my online tax return), the mortgage interest relief isn't mentioned.

Dazed_and_confused

What did you enter in box 44 of the return?

m0nkmaster

I'm doing it online, but in the equivalent of box 44 "Loan interest and other financial costs:", I put 50% of my mortgage interest charge for the year. Let's say my mortgage interest for the year was £1,500. I put £750.

However, with the new rules I can, to partly make up for the fact I now have £750 more taxable profit on the rental, take advantage of interest tax relief themortgageworks.co.uk/support/tax-relief-changes

Examples:
themortgageworks.co.uk/support/new-tax-system

With these rules in 18/19, whilst I can now only deduct 50% of my mortgage interest from my rental income, I can reduce my tax bill by 20% of the deductible Mortgage Interest (which is £150). The online form isn't taking that £150 into account in its calculation.

Dazed_and_confused

I think you are confusing box 26 and box 44.

Box 26 relates to the proportion of qualifying finance costs which are an allowable expense i.e. it reduces your profit.

Box 44 is for the qualifying finance costs which cannot be claimed in box 26.

Until you complete the return correctly the calculation will never include the additional tax credit due.

And don't forget not everyone is able to utilise the tax credit, it depends, amongst other things, on how much profit you make from the rental property.

m0nkmaster

Dazed_and_confused wrote: »

What did you enter in box 44 of the return?

There doesn't appear to be an equivalent of box 44 online, only box 26.

m0nkmaster

I've found the field I've been looking for! :-)

I wasn't confusing the equivalent of box 26, I just couldn't see the box 44 equivalent :-)

"Residential finance costs not included in 'Loan interest and other financial costs': (Optional) Help about: Residential finance costs not included in 'Loan interest and other financial costs'".

Not clear at all, but I got there in the end.

Thanks so much for helping me out here all :-)

Dazed_and_confused

Assuming you are able to use the tax credit then I think it should appear towards the end of the tax calculation

m0nkmaster

Dazed_and_confused wrote: »

Assuming you are able to use the tax credit then I think it should appear towards the end of the tax calculation

Yep, there it is. Saved me roughly £100. Result!

sb94707

hi all.

Any ideas why id be getting this warning.
im entering 50 % of the finance charge here, and the remaining in the other box, which is correct for 18/19 tax year.
Any help welcome. is it just so that everyone thinks twice.
strange as I dont get on my tax retuen, but I do on the wifes ?

Thanks.