Relief for finance cost on BTL

Bookworm105

AskAsk said:

Bookworm105 said:

AskAsk said:

[Deleted User] said:

Maybe reading this incorrectly but if the amount upon which you are liable to tax is £1717 in the final calculation you can only claim interest relief on £1717, reducing the tax to zero. 

Not clear from the explanation provided.

The £1,717 is the item in the "view your calculation" print out under Pay, pensions, profit etc that is subject to 20% tax.  The rest of the income is taxed at other rates as my total taxable income for the year is £55,951 after the personal allowance deduction.

that is possibly correct as people often overlook the 3rd element of the restriction: "adjusted net income" ie total income net of personal allowance (note that excludes savings interest and dividends) 

so if your employment + self employment income + rental profits less personal allowance = 1717 (ignoring savings interest & dividends) then that is the restricted amount for the tax relief calculation 

Tax relief for residential landlords: how it's worked out - GOV.UK (www.gov.uk)

I think I have worked it out.  My basic rate allowance is £41,300 and they have given most of this to the savings and securities interest.  If they were to increase this £1,717 it would mean more of the savings interest would be pushed into the 40% tax band instead of the 20% tax band, so I would end up paying the same amount of tax in reality.

This way, I can carry forward the unrelieved finance costs to the next year, which unfortunately, doesn't help me here as I won't have any income to declare next year for the property.

I think we are at the same point, although i dislike your use of the phrase "My basic rate allowance is £41,300" since that appears to include the items i said you exclude 

employment + self employment income + rental profits (excluding savings interest and dividends) = £x
deduct personal allowance £x - 12,570 = 1,717  "adjusted net income"
do those figures come to that total?


(BTW, how come you have so much unearned income outside an ISA?)

AskAsk

Bookworm105 said:

AskAsk said:

Bookworm105 said:

AskAsk said:

[Deleted User] said:

Maybe reading this incorrectly but if the amount upon which you are liable to tax is £1717 in the final calculation you can only claim interest relief on £1717, reducing the tax to zero. 

Not clear from the explanation provided.

The £1,717 is the item in the "view your calculation" print out under Pay, pensions, profit etc that is subject to 20% tax.  The rest of the income is taxed at other rates as my total taxable income for the year is £55,951 after the personal allowance deduction.

that is possibly correct as people often overlook the 3rd element of the restriction: "adjusted net income" ie total income net of personal allowance (note that excludes savings interest and dividends) 

so if your employment + self employment income + rental profits less personal allowance = 1717 (ignoring savings interest & dividends) then that is the restricted amount for the tax relief calculation 

Tax relief for residential landlords: how it's worked out - GOV.UK (www.gov.uk)

I think I have worked it out.  My basic rate allowance is £41,300 and they have given most of this to the savings and securities interest.  If they were to increase this £1,717 it would mean more of the savings interest would be pushed into the 40% tax band instead of the 20% tax band, so I would end up paying the same amount of tax in reality.

This way, I can carry forward the unrelieved finance costs to the next year, which unfortunately, doesn't help me here as I won't have any income to declare next year for the property.

I think we are at the same point, although i dislike your use of the phrase "My basic rate allowance is £41,300" since that appears to include the items i said you exclude 

my BTL profit is £8,214 - personal allowance £12,570 = a negative number.  I don't have employment or self employment income.  So this £1,717 is not from those items that you have in the formula.

AskAsk

[Deleted User] said:

AskAsk said:

[Deleted User] said:

Maybe reading this incorrectly but if the amount upon which you are liable to tax is £1717 in the final calculation you can only claim interest relief on £1717, reducing the tax to zero. 

Not clear from the explanation provided.

The £1,717 is the item in the "view your calculation" print out under Pay, pensions, profit etc that is subject to 20% tax.  The rest of the income is taxed at other rates as my total taxable income for the year is £55,951 after the personal allowance deduction.

I don’t understand this. How could only £1717 of income from pay, pensions or profits only be subject to 20% tax?

What is the other income? CGT? Dividends? Interest?

savings interest, dividends, interest on investment in stocks & shares.

Bookworm105

AskAsk said:

Bookworm105 said:

AskAsk said:

Bookworm105 said:

AskAsk said:

[Deleted User] said:

Maybe reading this incorrectly but if the amount upon which you are liable to tax is £1717 in the final calculation you can only claim interest relief on £1717, reducing the tax to zero. 

Not clear from the explanation provided.

The £1,717 is the item in the "view your calculation" print out under Pay, pensions, profit etc that is subject to 20% tax.  The rest of the income is taxed at other rates as my total taxable income for the year is £55,951 after the personal allowance deduction.

that is possibly correct as people often overlook the 3rd element of the restriction: "adjusted net income" ie total income net of personal allowance (note that excludes savings interest and dividends) 

so if your employment + self employment income + rental profits less personal allowance = 1717 (ignoring savings interest & dividends) then that is the restricted amount for the tax relief calculation 

Tax relief for residential landlords: how it's worked out - GOV.UK (www.gov.uk)

I think I have worked it out.  My basic rate allowance is £41,300 and they have given most of this to the savings and securities interest.  If they were to increase this £1,717 it would mean more of the savings interest would be pushed into the 40% tax band instead of the 20% tax band, so I would end up paying the same amount of tax in reality.

This way, I can carry forward the unrelieved finance costs to the next year, which unfortunately, doesn't help me here as I won't have any income to declare next year for the property.

I think we are at the same point, although i dislike your use of the phrase "My basic rate allowance is £41,300" since that appears to include the items i said you exclude 

my BTL profit is £8,214 - personal allowance £12,570 = a negative number.  I don't have employment or self employment income.  So this £1,717 is not from those items that you have in the formula.

ok, then please work your way through this 
PIM2058 - Deductions: interest: restriction for income tax purposes from 2017/18: calculation - HMRC internal manual - GOV.UK (www.gov.uk)