Home and Flat (Let) Which Mortgage to Quote on Tax Claim

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  • Home and Flat (Let) Which Mortgage to Quote on Tax Claim

    I have two properties; one house (my residence) and one buy to let flat. Mortgage on the house is £200k, mortgage on the flat is £136k.

    As is often the way with these things....the informal advice I have received suggests that I quote the maximum mortgage cost whichever property that is on - when submitting my tax claim. Figures would be £7000 on the house versus £3800 on the flat - both interest only of course.

    I have my doubts about this as the rules state that one can claim mortgage interest relief when the a mortgage is raised for the sole purpose of purchasing a letting property.

    The difference is substantial and will change my small profit into loss (and hence no tax to pay) on the flat.

    NB When I bought the house I increased the mortgage on the flat to release £50k to buy the house.

    Any help appreciated - thanks.

  • #2
    I don't think that's right. As far as I'm aware you can only claim the mortgage interest on the rental property. However if you borrowed money elsewhere to use in your property business, such as on you home or through a loan, then the interest from that borrowing is an allowable expense. However you must be able to evidence that the funds borrowed were directly used in you property businesss.

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    • #3
      Thanks, I suspected it was hokum - or more likely other people chancing it.... I have submitted the lower value for the flat specific mortgage.

      Thanks again.

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      • #4
        People get confused and often don't realise the distinctions that make something allowable in one situation but non-allowable in others. For example I know someone that purchased a buy to let by remortgaging their home as it was better for them. In that case the funds were directly used by the property business and therefore the interest is an allowable expense. However those that don't know the details may think that they shouldn't be using the mortgage interest on their own home as an expense, or may think that anyone can!

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