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  • FIRST POST
    • doubleOrQuits
    • By doubleOrQuits 10th Jul 18, 6:58 AM
    • 2Posts
    • 0Thanks
    doubleOrQuits
    Resi/BTL mortgage - can I deduct BTL mortgage interest costs?
    • #1
    • 10th Jul 18, 6:58 AM
    Resi/BTL mortgage - can I deduct BTL mortgage interest costs? 10th Jul 18 at 6:58 AM
    Hi,

    Do any clever MSEs out there know if, on my Self-assessment, I can deduct mortgage interest costs from by BTL property, given the following -

    A year ago, we paid off the BTL mortgage (charging us about 3.5pc/year) by taking out an 'additional mortgage account'' on our residential mortgage (charging us about 1.2pc/year). This was because the 20pc tax deductible of the 3.5pc mortgage costs (I pay only basic rate tax) was vastly outweighed by the reduction in mortgage costs.

    However I'm wondering whether I can continue claim a deduction on the now reduced mortgage costs, even though it's under the residential mortgage (albeit as an 'additional account'). Would anyone know?

    Thanks!
Page 1
    • purdyoaten2
    • By purdyoaten2 10th Jul 18, 9:10 AM
    • 884 Posts
    • 431 Thanks
    purdyoaten2
    • #2
    • 10th Jul 18, 9:10 AM
    • #2
    • 10th Jul 18, 9:10 AM
    In short - Yes. The fact that it is an additional account helps.
    purdyoaten lost his password
    • doubleOrQuits
    • By doubleOrQuits 12th Jul 18, 3:23 PM
    • 2 Posts
    • 0 Thanks
    doubleOrQuits
    • #3
    • 12th Jul 18, 3:23 PM
    • #3
    • 12th Jul 18, 3:23 PM
    I just spoke to someone on the HMRC phone helpline, who, after consultation with managers, said that it would not be possible to offset this interest against rental income, as the mortgage is secured against our residential property... d'oh.

    purdyoaten2 / anyone else - do you think there are circumstances where it is possible?

    please do let me know if so, could help me pay me for the repair work we've not yet done...

    thanks
    • Pennywise
    • By Pennywise 12th Jul 18, 4:22 PM
    • 10,315 Posts
    • 19,241 Thanks
    Pennywise
    • #4
    • 12th Jul 18, 4:22 PM
    • #4
    • 12th Jul 18, 4:22 PM
    I just spoke to someone on the HMRC phone helpline, who, after consultation with managers, said that it would not be possible to offset this interest against rental income, as the mortgage is secured against our residential property... d'oh.

    purdyoaten2 / anyone else - do you think there are circumstances where it is possible?

    please do let me know if so, could help me pay me for the repair work we've not yet done...

    thanks
    Originally posted by doubleOrQuits
    HMRC are wrong - there is no requirement for the loan to be secured on the premises being let.
    • 00ec25
    • By 00ec25 12th Jul 18, 7:28 PM
    • 6,632 Posts
    • 6,207 Thanks
    00ec25
    • #5
    • 12th Jul 18, 7:28 PM
    • #5
    • 12th Jul 18, 7:28 PM
    when you speak to an HMRC call centre you get a call centre person with a sketchy knowledge of some basic tax. When they consult a "manager" that person may have more in depth knowledge, but no one can be an expert on everything and the manager's skill should therefore be in knowing how to look things up. It seems you got one who could not be bothered to do so ...

    what a loan is secured on is not the determinant
    https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim45685

    what the borrowed funds are used for is the determinant
    https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim45690

    your BTL had borrowings which were used to fund the BTL. Those borrowings continue to fund the BTL, but have now been transferred to a private residence. The principle is to establish that the borrowings are all related to the BTL, and therefore its capital account is not overdrawn. In which case all of the interest is allowable against the rental business, and there is no need to restrict the interest. However, working out the capital account and documenting the calculation to support your tax return may be better left to a professional adviser with the required knowledge:

    https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim45705

    and finally.......
    you have a separately identifiable loan
    https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim45675


    go see a decent tax accountant
    Last edited by 00ec25; 13-07-2018 at 7:08 PM.
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