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Tax advice on rentals
LCK73
Posts: 244 Forumite
A relative of mine and his partner own outright as joint tenants the property in which they presently live. One partner is a higher rate taxpayer, the other is a basic rate taxpayer. Both are members of (employers') pension schemes.
They are in the process of purchasing, with a mortgage, a somewhat more conveniently located property in which they plan to live. They are contemplating keeping their present property to rent out. Neither of the properties has a present value in excess of the IHT limit.
Can you advise this couple on the most tax effective arrangements for their new situation?
They are in the process of purchasing, with a mortgage, a somewhat more conveniently located property in which they plan to live. They are contemplating keeping their present property to rent out. Neither of the properties has a present value in excess of the IHT limit.
Can you advise this couple on the most tax effective arrangements for their new situation?
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Comments
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Wow, that is hardly a simple task. Talk to an accountant.
I can only advise that you to have the maximum mortgage possible on your rented property - but this may well be dependant on other factors.0 -
The mortgage interest upto the value of the property when it was first let would be considered an allowable expense. It is not necessary for the mortgage to be secured on the rental property it can be secured on any property with the same ownership.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0
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The mortgage interest upto the value of the property when it was first let would be considered an allowable expense. It is not necessary for the mortgage to be secured on the rental property it can be secured on any property with the same ownership.
My accountant raised an eyebrow when I asked this about this -
He mentioned something about getting turned inside out with an IR investigation.
Whilst quite allowable to remortgage as far as the BS will allow and use those funds to reduce the principal home mortgage, I'd think that trying to claim interest relief on anything other than the amount stated on the BS certificate may well open the claimant up to all sorts of bother.
Let's take a property worth say £180K with a £60K mortgage, then as far as I can understand from the accountant, then tax relief on the actual interest paid on the advance each tax year is deductable, to say that you can claim relief on on an advance on another property seems a little odd.
If there isn't an advance in place against the rental property I cannot see how any relief can be claimed.0 -
The mortgage interest upto the value of the property when it was first let would be considered an allowable expense. It is not necessary for the mortgage to be secured on the rental property it can be secured on any property with the same ownership.
Having thought about this, sounds like you are saying they could claim, as an allowable expense, the interest on the mortgage on the house they will live in (both properties are worth about £150K each). Is this right given the rented house will have no mortgage on it?......It would be good if it was right.:j0 -
Having thought about this, sounds like you are saying they could claim, as an allowable expense, the interest on the mortgage on the house they will live in (both properties are worth about £150K each). Is this right given the rented house will have no mortgage on it?......It would be good if it was right.:j
I think that there may possibly be a flaw in the plan. In this case no one would ever pay tax on rental income.0
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