Buy to Let & Tax

fishhawks

Hello

I wonder if anyone can help me. I am currently in the process of buying a flat to rent out. I am re-mortgaging our own home to buy the flat out right, obviously this will increase my own home mortgage payments which the rental income will cover the additional payment. For tax purposes though will the rental income show against the flat as fully taxable or can the rent be off set against the mortgage as an expense of the flat.

(Hope this makes sense to someone!)

Thanks

telly-addict

Mortgage interest can be set against rental income to reduce the amount of letting income chargeable to income tax, as can expenses such as insurance, letting agents fees, council tax.

I would suggest however that there needs to be a clear paper trail showing the amount of the loan and therefore the interest that relates to the purchase of the flat, to prove to the Revenue that you are not claiming some of the interest that relates to your own property, as this is not allowed.

Some lenders show additional borrowing with a separate sub-account number, and that would be helpful. They can then usually issue a separate certificate of mortgage interest paid which may be requested by the Revenue and is worth getting in any event.

http://www.hmrc.gov.uk/worksheets/sa105notes.pdf

This is a link to the Notes to the Land and Property pages of the Self Assessment return, with lots of info that should be helpful.