Tax allowance for mortgage overpayments

Dippykat

kingstreet said:

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.

Right you are Kingstreet. That's what I like a nice straight, no messing answer. I'll forget that then and just concentrate on battling against the ever-rising interest rates. Cheers : )

Dippykat

kingstreet said:

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.

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

I might be being dumb?!  But how does the tax man know how much my interest payments are?

housebuyer143

Dippykat said:

kingstreet said:

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.

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

I might be being dumb?!  But how does the tax man know how much my interest payments are?

How does the tax man know anything you claim is correct? Because they rely on you not committing tax fraud. If they pull your file for auditing and your interest payments are not as you listed you will get in trouble. It's would be very easy for them to ask for proof as in a mortgage statement.

Dippykat

housebuyer143 said:

Dippykat said:

kingstreet said:

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.

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

I might be being dumb?!  But how does the tax man know how much my interest payments are?

How does the tax man know anything you claim is correct? Because they rely on you not committing tax fraud. If they pull your file for auditing and your interest payments are not as you listed you will get in trouble. It's would be very easy for them to ask for proof as in a mortgage statement.

Hi Housebuyer,
Obv I would never lie on my tax return!! 
I've just filled it in online and there is now nowhere to write how much interest I pay (since the relief has reduced over the last 4 years). So where does the tax credit come from?

housebuyer143

Dippykat said:

housebuyer143 said:

Dippykat said:

kingstreet said:

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.

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

I might be being dumb?!  But how does the tax man know how much my interest payments are?

How does the tax man know anything you claim is correct? Because they rely on you not committing tax fraud. If they pull your file for auditing and your interest payments are not as you listed you will get in trouble. It's would be very easy for them to ask for proof as in a mortgage statement.

Hi Housebuyer,
Obv I would never lie on my tax return!! 
I've just filled it in online and there is now nowhere to write how much interest I pay (since the relief has reduced over the last 4 years). So where does the tax credit come from?

Hmmmm. My husband does ours so couldn't say. We do claim it though.

Dippykat

I hope he does it correctly.

AlexMac

You ask

I might be being dumb?!  But how does the tax man know how much my interest payments are?

Sorry Dippykat, Yes you are being dumb; (nominative determinism?)

One no longer enters annual interest in the "Property Expenses"  box on the Self Assessment return, but on a later page -

 in the return section titled "Calculating your taxable profit or loss" in a box called:

44. Residential property finance costs:
(the number 44 refers to the paragraph in the saved version of my recent return )

So open up your online return again (you can still amend it, even if you've submitted it) , go past the bit where you enter
"Property expenses"; such as

24. Rent, rates, insurance, ground rents etc:	£
25. Property repairs and maintenance:	£
26. Non-residential property finance costs:	£ Not Entered
27. Legal, management and other professional fees:	£ Not Entered
28. Costs of services provided, including wages:	£
29. Other allowable property expenses: And fill in the (interest only) expenditure in that later box. You'll then get the 20% relief applied to that Or hire an accountant Or ask me! Good luck PS- I won't tell the taxman you've been overclaiming for total mortgage repayments, if you were including all payments including the capita!

anselld

Dippykat said:

housebuyer143 said:

Dippykat said:

kingstreet said:

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.

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

I might be being dumb?!  But how does the tax man know how much my interest payments are?

How does the tax man know anything you claim is correct? Because they rely on you not committing tax fraud. If they pull your file for auditing and your interest payments are not as you listed you will get in trouble. It's would be very easy for them to ask for proof as in a mortgage statement.

Hi Housebuyer,
Obv I would never lie on my tax return!! 
I've just filled it in online and there is now nowhere to write how much interest I pay (since the relief has reduced over the last 4 years). So where does the tax credit come from?

SA105 Box 44

Schwarzwald

Dippykat said:

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

You need to learn the basics of accounting incl the difference between income relevant expenses and mortgage repayments which is cashflow and balance relevant but not income relevant

Dippykat

Thanks Alexmac. I did check, after a bit of Googling I found the box that I had missed on my tax return. 

Do you know, someone once said to me “get an accountant, they’ll do all that for you” of course I didn’t bother!

And, and I shouldn’t have to keep justifying my honesty. I have only ever claimed allowance for the interest on my interest-only mortgage! 😇 In fact, part of the reason for not switching to a repayment mortgage was the worry of having to work out how much was interest!! 😂

Thanks too, Anselld

I think I’ll be ok for another year!