Can I offset the interest paid on my mortgage against tax if I let out home?

pdotie

Hi

I have searched without much success and have ended up a little more confused than before.

My situation is as follows:

Currently own home, repayment mortgage

I am leaving London to go to back to University but want to hold on to my flat as chances are I will come back when course is finished (18 months) so I would like to let it out.

It is now remortgage time so not a bad time to sort all this out - the remortgage will give me a clear picture of my finances over the next couple of years.

I am confused as to whether I would be able to offset the cost of the interest part of my loan against my tax liability.

http://property.timesonline.co.uk/tol/life_and_style/property/buying_and_selling/article1851885.ece this article seems to indicate that it is purely interest only mortgages which can be offset

whereas this website would indicate that it would be the interest even if there were a repayment element http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10014027

Figures are:
Rental income should be £1200 (gross - 10% letting agent fees to be taken off)
Mortgage payments will be £1250
Interest part of mortgage would be about £900 per month (same as interest only)
Service charge to be paid of £85 per month

Tax will still be an issue even though I am a student as I will be earning £35k per year

I will be renting at university if that makes any difference

thanks in advance, and if there is a thread already covering this, let me know.

fengirl_2

Yes, interest only is allowable against letting income.
Is the property being let furnished? If so, dont forget your 10% wear and tear allowance, also insurance.

silvercar

You can claim the interest on your mortgage payments, restricted to the value of the property at the time you started letting it.

For an interest only mortgage it would be all the payments, for a repayment mortgage you would need to look on your annual mortgage statement for the amount of interest you have paid.

If you are remortgaging and intend to let the property out, you need to state this when applying for your mortgage. Otherwise it would be committing fraud by obtaining money by deception.

If you already had a mortgage, you should obtain the lenders consent to lease. Though failure to do so would be abreach of your mortgage terms and conditions as opposed to anything more serious.

pdotie

silvercar wrote: »

You can claim the interest on your mortgage payments, restricted to the value of the property at the time you started letting it.

For an interest only mortgage it would be all the payments, for a repayment mortgage you would need to look on your annual mortgage statement for the amount of interest you have paid.

If you are remortgaging and intend to let the property out, you need to state this when applying for your mortgage. Otherwise it would be committing fraud by obtaining money by deception.

If you already had a mortgage, you should obtain the lenders consent to lease. Though failure to do so would be abreach of your mortgage terms and conditions as opposed to anything more serious.

Thanks for your replies.

With regards to obtaining money by deception, my idea to return to uni is still at planning stage and there is a (small) possibibilty that I will get accepted to do the course I want in London.

I will need to remortgage anyway as my fixed deal is coming to an end but I have already checked with my (current) lender and all I need to do is tell them when I decide to let it out. They stipulate that it must be done through a letting agency and with a minimum term letting etc.. If I return to uni elsewhere I will still be living in the property for a while (as course would not start till next year) but would be moving during the new fixed term.

Another option is that my sister moves in and I let out one room, however I am not sure about covering the mortgage while she lives there so that is a last resort. It does have the advantage of being able to have her keep an eye on things - better the devil you know.