Offsetting interest paid against taxable rent income

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    Offsetting interest paid against taxable rent income

    1. Main residence, remorgaged with First Direct, offset rate is 0.79 above base.
    2. Letting out 2nd home, morgage is 90% of its value outstanding at the SVR rate with RBS for 4.44%. (Say £212k)
    3. Spare fund, can pay off the mortgage for the letted property. (£212K)
    Question: Can we use the interest from £212k of our main residnence mortgage to against our rental income from letted property?

    #2
    I don't think so.

    The mortgage on the main residence was not used to purchase the let property.

    Would it not be more tax efficient to leave the mortgage on the let property assuming the rent can cover this, and pay off some of the main mortgage?

    Comment


      #3
      I've looked at this myself for a similar situation. The outcome was that only a mortgage on the rented property can be offset against rental income.

      If you had more than one *rented* accomodation then I think you can do this and offset gains/losses as rented accomodations are classed as businesses whereas your main home is not.

      Pay it against your main home and keep your mortage running. Indeed, in my case I will even transfer some outstanding mortgage from my main home onto the rented accomodation.

      Clearly your interest rate on your rented accomodation is not so good (hence you wanted to pay off that one), so perhaps you would want to look at re-mortgaging that instead to bring the rate down (yes, First Direct seem to have the best rate aorund at present, although I think today HSBC brought out something new... can't remember)

      **note** I am new here and have no background in this other that what I have learned recently, but I think i'm, on the right track. Others will confirm

      Comment


        #4
        Two links for you to read and consider :

        http://www.hmrc.gov.uk/manuals/bimmanual/BIM45700.htm

        and

        PIM2105 in the property manual.

        Regards Peter

        Comment

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