Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Kalashnikov
    • By Kalashnikov 7th Jan 18, 1:37 AM
    • 14Posts
    • 3Thanks
    Kalashnikov
    Overpaying BTL, is it efficient for tax purposes
    • #1
    • 7th Jan 18, 1:37 AM
    Overpaying BTL, is it efficient for tax purposes 7th Jan 18 at 1:37 AM
    Hi Happy new year

    I have a question about overpayments. We are fortunate to be able to pay 10% every year on our residential property. And I can completely understand the benefits. Etc

    lender A Property A (residential) - 2.54 - 5y fixed ending - 01/04/2021 - ERC fixed outstanding 148k current LTV 40%


    Below are two of my BTL mortgages, which one should we overpay with a lump some approx 13-15k

    Lender B - Poperty B (freehold) - 3.99 (interest only) 5y fixed ending 30/09/2020 - ERC FIXED 213k current LTV 60%

    Lender C - Property C (leasehold) - 2.50 (repayment) -5y fixed ending 31/03/2022 - ERC tapered 130k current LTV 60%

    Both BTLs are held in unequal shares with my spouse barring most the income and tax burden being a lower rate tax payer.

    My question is which mortgage could do with this cash injection to further reduce are tax exposure given mortgage interest will be tapered over the next 4 years.

    Please give me your calculations and thoughts on this. Thanks in anticipation
    Last edited by Kalashnikov; 07-01-2018 at 8:30 AM. Reason: Typo
Page 1
    • anselld
    • By anselld 7th Jan 18, 3:32 PM
    • 5,762 Posts
    • 5,444 Thanks
    anselld
    • #2
    • 7th Jan 18, 3:32 PM
    • #2
    • 7th Jan 18, 3:32 PM
    Mortgage interest relief is not tapered for lower rate tax payers.

    Pay down the highest interest rate first (3.99).
    • Pennywise
    • By Pennywise 7th Jan 18, 3:44 PM
    • 10,222 Posts
    • 19,035 Thanks
    Pennywise
    • #3
    • 7th Jan 18, 3:44 PM
    • #3
    • 7th Jan 18, 3:44 PM
    Mortgage interest relief is not tapered for lower rate tax payers.
    Originally posted by anselld
    No, but the method of calculation may affect a "basic rate" taxpayer, i.e. by pushing them into higher rate.
    • Kalashnikov
    • By Kalashnikov 7th Jan 18, 5:22 PM
    • 14 Posts
    • 3 Thanks
    Kalashnikov
    • #4
    • 7th Jan 18, 5:22 PM
    • #4
    • 7th Jan 18, 5:22 PM
    Mortgage interest relief is not tapered for lower rate tax payers.

    Pay down the highest interest rate first (3.99).
    Originally posted by anselld


    The reduction in relief is being phased in between now and 2020 and will be replaced by a 20pc tax credit. From this year landlords can offset only 75pc of their mortgage interest against their profits. This falls to 50pc next year, 25pc in 2019 and zero in 2020.
    • anselld
    • By anselld 7th Jan 18, 5:30 PM
    • 5,762 Posts
    • 5,444 Thanks
    anselld
    • #5
    • 7th Jan 18, 5:30 PM
    • #5
    • 7th Jan 18, 5:30 PM
    The reduction in relief is being phased in between now and 2020 and will be replaced by a 20pc tax credit. From this year landlords can offset only 75pc of their mortgage interest against their profits. This falls to 50pc next year, 25pc in 2019 and zero in 2020.
    Originally posted by Kalashnikov
    Yes, I know. However, for a lower rate tax payer (subject to remaining lower rate in the new scheme) there is no impact since they are only getting 20% tax relief now anyway.
    • 00ec25
    • By 00ec25 7th Jan 18, 6:05 PM
    • 6,513 Posts
    • 6,071 Thanks
    00ec25
    • #6
    • 7th Jan 18, 6:05 PM
    • #6
    • 7th Jan 18, 6:05 PM
    The reduction in relief is being phased in between now and 2020 and will be replaced by a 20pc tax credit. From this year landlords can offset only 75pc of their mortgage interest against their profits. This falls to 50pc next year, 25pc in 2019 and zero in 2020.
    Originally posted by Kalashnikov
    agreed, but irrelevant if you remain a basic rate (20%) taxpayer and the changes do not push you into the higher rate bracket because of the way the calculation works

    read: https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

    as a HR taxpayer surely you can do the basic maths yourself? Without knowing what your ERC is, any sums we do may be misleading.
    • Kalashnikov
    • By Kalashnikov 7th Jan 18, 6:24 PM
    • 14 Posts
    • 3 Thanks
    Kalashnikov
    • #7
    • 7th Jan 18, 6:24 PM
    • #7
    • 7th Jan 18, 6:24 PM
    agreed, but irrelevant if you remain a basic rate (20%) taxpayer and the changes do not push you into the higher rate bracket because of the way the calculation works

    read: https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

    as a HR taxpayer surely you can do the basic maths yourself? Without knowing what your ERC is, any sums we do may be misleading.
    Originally posted by 00ec25

    please assume 10% every year is without penalty. max ill pay is 10%
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

249Posts Today

3,408Users online

Martin's Twitter
  • RT @LaraLewington: ...and mine suggested I'd achieved a lifelong ambition of being sawn in half by a magician - at our wedding. Wasn't. Don?

  • We are working on it - I think BA has behaved awfully on this. Those flight were no obviously a glitch. It should? https://t.co/8pvtXtUEqi

  • RT @thenicolabryant: Absolutely. We need mental health and financial health as advocated my @MartinSLewis , to be taught in schools. So muc?

  • Follow Martin