Tax allowance for mortgage overpayments

Dippykat

Hi, I've searched high and low on the internet and I can find the answer to this... can anyone guide me please?

I have an interest-only mortgage on my buy-to-let property. Up until recently 20-21 I was able to claim the mortgage interest as an allowable expense on my property income tax return, this has now stopped and the g'ment gives a straight tax relief based on my total earnings. Ok got it fine.

Now, I have recently started to make overpayments on my mortgage, and I wanted to know if I can claim tax relief for these mortgage payments?

Any help or advice is welcome please. Thanks.

Dippykat

** I can't find the answer **

Dazed_and_C0nfused

Pretty sure you can never claim tax relief in respect of capital repayments, it's only interest that's relevant for tax purposes.

And as you know thats restricted as a tax reducer rather then being an allowable expense 😟

DE_612183

I thought tax relief was on the "income" that you get from the property - not your expenditure....

housebuyer143

You get a 20% credit toward interest payments. If you over pay that is capital payments and are not an allowable expense. 

Dippykat

Hi, thanks for the advice so far.
Can I offset the overpayments against the rental income? So less 'profit' - does that work?

dimbo61

Are you a higher rate Tax payer ?
You pay 40% on your rental income but can only claim 20% credit towards the Interest you pay on your Interest Only mortgage.
Hence why many Landlords are losing money and selling up 

theartfullodger

Buy a book on property tax FOR THE RELEVANT YEAR.  Rules change each year. (Does question relate to 2021/2022 tax year, self assessment due in about 2 months, or are you asking re current, 2022/2023 tax year please?

There are over 10 taxes a landlord may pay.  Don't just worry about income tax...

kingstreet

Dippykat said:

Hi, thanks for the advice so far.
Can I offset the overpayments against the rental income? So less 'profit' - does that work?

No. Never.

Lump sum capital repayments or the capital element of a repayment mortgage cannot be used to offset rental income. You have never been able to do that.

Dippykat

dimbo61 said:

Are you a higher rate Tax payer ?
You pay 40% on your rental income but can only claim 20% credit towards the Interest you pay on your Interest Only mortgage.
Hence why many Landlords are losing money and selling up 

I don't think I get any relief on the mortgage interest now... it's been phased out over the last 4 years.

kingstreet

https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-aHQIA2d4bjXj

Landlord mortgage interest tax relief in 2022-23

Since April 2020, you've no longer been able to deduct any of your mortgage expenses from your rental income to reduce your tax bill.

Instead, you now receive a tax-credit, based on 20% of your mortgage interest payments.

This is less generous than the old system for higher-rate taxpayers, who effectively received 40% tax relief on mortgage payments.

The new system has been phased in gradually since 2017.

Why the tax credit is bad news for landlords

The new system means higher or additional-rate taxpayers can no longer claim the tax back on their mortgage repayments, as the credit only refunds tax at the basic 20% rate, rather than the top rate of tax paid.

Less obviously, the new rules could force some landlords into a tax bracket, because they'll need to declare the income that was used to pay the mortgage on their tax return.

This could push your total income into the higher or additional-rate tax brackets, depending on your income from other sources, such as your salary or pension.