remortgage buy to-let

infotx

hello,what i was wondering is can i remortgage a buy to-let property to release equity and use the money for anything i want ? ie: personal use and are their any tax implications if i do so. thank you any advice well app.

ohbrightone

you can still only use the original mortgage when considering mortgage interest payments being deductible against your rental income

lucien2k

The reply slightly concerned me because it sounds a bit unrealistic so I did some research on the subject.

The arguement seems to hinge on BIM45700 which says "A proprietor of a business may withdraw the profits of the business and the capital they have introduced to the business."

http://www.hmrc.gov.uk/manuals/bimmanual/bim45700.htm

The general consensus seems to be that this allows you to withdraw capital from your business (buy to let) and then deduct the interest as long as the amount you withdraw is less than the market value of the property when it was first introduced to the rental market.

You are simply withdrawing capital that you have introduced into the business.

Cook_County

ohbrightone wrote: »

you can still only use the original mortgage when considering mortgage interest payments being deductible against your rental income

Just in case anyone else should read this thread, this reply is plainly wrong.

GARDINER

buy to let is not a 'business' in the true sense for HMRC's purposes. It is an investment, although the term 'property business' is used. The instructions in
BIM45700 relate to 'proper' businesses and the example of the rental business only applies in that case because the equity in the flat was already his when the flat was rented out. Similarly if he had purchased a flat specifically to rent out when he went abroad the whole of the mortgage would be allowable as a deduction against the rents. ohbrightone was in the main correct and the only interest that can be set against the rents received is the interest on the original mortgage - see
http://www.hmrc.gov.uk/manuals/pimmanual/PIM2105.htm

Confusingly I'm pretty sure that there is however legislation that states you can take out your own money from the equity tied up in a buy to let- that is the original deposit you put down - and still get the tax relief, but that is only becase you are withdrawing your own cash that was invested and is not the same as withdrawing from the increase in the value of the property which is of course potentially liable to Capital Gains Tax

Anon

A similar topic, with more accurate advice (from a former tax inspector and others), was discussed recently http://forums.moneysavingexpert.com/showthread.html?t=378750

Basically, my understanding from the discussions is that mortgage interest up to the value of the property when it is first let is allowable. If this means remortgaging to release equity, then so long as this is not more than the value of the property when first let, the interest is allowable against tax (and you can do what you want with the money you have released).

Anon

silvercar

Anon wrote:

Basically, my understanding from the discussions is that mortgage interest up to the value of the property when it is first let is allowable. If this means remortgaging to release equity, then so long as this is not more than the value of the property when first let, the interest is allowable against tax (and you can do what you want with the money you have released).

correct.
Of course it is your equity, so you can take it out and do what you want with it. The mortgage interest as an allowable expense is restricted to the value when first let.