Interest on remortgage of buy to let

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    Interest on remortgage of buy to let

    Can anyone confirm whether for 2017 return if interest and associated legal/remortgage fees on the additional advance should be disallowed or restricted on a pro -rata basis if the advance is not "wholly and exclusively" used for the the property

    #2
    It doesn't matter what the mortgage was used for, it's the loan that's part of the business and the interest is allowable (subject to the new restrictions going forward).

    Interest on the additional lending is only allowed up to the point that the loan value equals the total value of the asset when it became part of the letting business.
    So if the property was acquired a while ago for £100,000 (say with an initial mortgage of £60,000), only BTL lending to a maximum of £100,000 in total is ever allowed, if the total mortgage after the new borrowing is more than £100,000, the interest needs to be apportioned.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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      #3
      Thanks very much for this I applied the original purchase price (2003) and added in the 2015 Lease Extension and Capital Improvements both of which were funded from the new advance. I then compared this uplifted capital value against the new total borrowings (including the additional remortgaged amount) The articles I read were not clear on whether Capital Value approach could still be used....

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      • Reply to Caught out by changes to Capital Gains Tax
        by jpkeates
        You have to make the return to tell HMRC there is no tax to pay, if that's the case.
        There is no option not to tell HMRC....
        09-12-2021, 09:58 AM
      • Caught out by changes to Capital Gains Tax
        by reluctantlandlord1976
        I appreciate 'ignorance' is no excuse, however there are some mitigating factors, i.e. due to illness etc.

        1. Previous family home rented out - terrible tenants - left owing rent, bad repairs etc. [usual story for some] subsequently property not let for 2 years for a number of reasons while...
        06-12-2021, 13:51 PM
      • Reply to Caught out by changes to Capital Gains Tax
        by Gordon999
        I think Andrew is correct .

        You start with 1/3 interest ( in 1982 valued at £6500 ? ) plus 1/6 interest from parent1 ( valued at £20K ?) plus 1/2 interest from parent 2 ( valued at £60K ? ). This probably takes your total entry cost to around £40K.

        Your total capital...
        09-12-2021, 09:47 AM
      • Reply to Caught out by changes to Capital Gains Tax
        by reluctantlandlord1976
        Hi Andrew
        First of all I've got an initial appointment to speak to an accountant on Friday!

        Can I just check where you write ' ...at death 1/6th of the value of the whole would have been deemed to pass to you for CGT purposes as the survivors would share the whole'.

        Does...
        08-12-2021, 18:02 PM
      • Reply to Caught out by changes to Capital Gains Tax
        by jpkeates
        Even if probate wasn't mandatory, it would probably have been useful.
        08-12-2021, 13:44 PM
      • Reply to Caught out by changes to Capital Gains Tax
        by AndrewDod
        Yes this would be the case if it was jointly owned (not as tenants in common). The situation would be that at death 1/6th of the value of the whole would have been deemed to pass to you (for CGT purposes), as the survivors would share the whole.

        So for the 3 periods you would be taken...
        08-12-2021, 12:51 PM
      • Reply to Caught out by changes to Capital Gains Tax
        by reluctantlandlord1976
        jpkeates
        There was no estate as such, property jointly owned - they were both retired at time of purchase living on small pensions, hence I bought with them so they could stay in the home they'd been renting from council from early 1950s to March 1982 at time of purchase. And I paid for the initial...
        08-12-2021, 10:50 AM
      • Reply to Caught out by changes to Capital Gains Tax
        by jpkeates
        I don't know the historic thresholds, but it's bizarre that there's no probate for both of your parents, their estate has to be tiny for that to be possible nowadays.
        It's probably too late for HMRC to do anything about that, but that process sets the values for CGT calculations later on, so it's...
        08-12-2021, 10:28 AM
      • Reply to Caught out by changes to Capital Gains Tax
        by reluctantlandlord1976
        Morning Andrew
        Thanks for your response early this morning and clarifying I have to make three separate calculations [the split wasn't clear on the CGT calculator].
        I understand the query on the value but this is an ex council house on a council estate [I feel I have to defend it here as...
        08-12-2021, 08:45 AM
      • Reply to Caught out by changes to Capital Gains Tax
        by AndrewDod
        As gordon indicates you need to consider it in three entirely separate parts, each have their own gain and calculation --

        The part YOU owned before Death 1
        The part YOU owned between Death 1 and Death 2
        The part you owned after Death 2

        Based on the values you give...
        08-12-2021, 05:52 AM
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