Tax question. relief for finance costs reduced to maximum allowable

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    Tax question. relief for finance costs reduced to maximum allowable

    Hi,

    Quick question for my tax return. My mortgage interest costs this year were £67,710.19 so £16,667.55 went through as a deduction and £50k odd went into the box to calculate the relief for finance costs. But instead of calculating 20% on the £50k it has reduced this to the maximum allowable and is given me 20% of £39,722.

    Is this right or have i done something wrong?

    Thanks very much

    #2
    Just to add a bit more info. I've recently incorporated all my properties. Instead of paying a punitive tax bill I chose to spend money on refurbishments effectively reducing my profit to zero. I did this as i basically got a 40% discount on any refurbishment work and then transferred everything over to my company. So teh tax calculation is saying my income this year on which tax is charged is £39,772 and this is the figure that the relief for finance cost has been reduced to, So I am in a position where i have spent money refurbishing properties and im not even allowed teh full relief for finance costs. Doesn't; seem fair

    Comment


      #3
      Was incorporation solely for tax reasons?
      I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

      Comment


        #4
        Hardly, the stamp duty tax was eye watering and the other expenses involved including remortgaging costs, solicitors fee, tax advice etc etc amounted to a large expense but it was teh only way forward if i wanted to expand. The personal borrowing restrictions that apply to individuals don't apply to ltd companies

        Comment


          #5
          You can write to hmrc and ask for a statement showing how they calculated your tax ( on form SA302 ).

          Comment


            #6
            You can carry forward the unrelieved “relievable amount” i.e finance costs on which you are unable to receive the restricted relief.

            The relief is capped each year at the lowest of the finance costs, your profit from property or your adjusted total income.

            Fun details here:https://www.gov.uk/hmrc-internal-man...manual/pim2058
            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).

            Comment

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