HMRC Query

Cariad71

Hi, I took a mortgage out in August 2012 on property 2, purely so I could keep property one as a rental. Normally I use the 1k property allowance on my tax bill. However, it's come to my attention that apparently HMRC say it doesn't matter where the money came through…the important thing is that it was borrowed to fund the rental. I pay £525 a month mortgage. Can I use 20% of the mortgage payments as property expenses? Thanks. Property 1 was worth 185k in 2012. Mortgage was 174k.

anselld

Yes you can use that as residential property finance cost. However it is not, strictly speaking an expense; it is a tax credit after everything else is calculated. Box 44 on the SA105, you enter the mortgage interest only.

sheramber

You cannot claim any capital repayment, only the interest portion.

However normally you take out a mortgage on property 1 to buy property 2 , the rental.

You took out a mortgage on property 2 to live in while already owning property 1 , presumably with no mortgage.

You did not take out the mortgage to buy the rental property so I am not sure the mortgage interest would be allowable .

sherlock228

https://forums.moneysavingexpert.com/discussion/comment/82171101#Comment_82171101

BIM45700 - Specific deductions - interest: Withdrawal of capital from a business - HMRC internal manual - GOV.UK

poseidon1

https://forums.moneysavingexpert.com/discussion/6686981/hmrc-query

Perhaps you can clarify how the facts you convey in this post, dovetail with your 2024 post below-

https://forums.moneysavingexpert.com/discussion/6559102/capital-gains-after-moving-back-into-a-property

On my reading of your 2024 post you obtained the mortgage in 2012 to buy the property you currently live in, presumably in preference to selling your first property. Your 1st property was we assume mortgage free at that point.

I cannot see you having a legitimate basis for claiming mortgage interest relief against what became your rental property on the mortgage used to buy your main residence.

My response would be different if the situation were reversed you already lived in a mortgage free property and remortgaged it to acquire a rental property. HMRC 's rules specifically allows that scenario - see the Lisa and John example in the article below-

https://www.taxinsider.co.uk/tax-articles/how-to-pay-off-your-residential-mortgage-and-claim-interest-relief-ta-1