Tax impact of offset mortgages

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  • Gordon999
    If you have raised a 100K mortgage from your own property to buy a rental income property, you should be able to claim the loan interest paid during the tax year ( 6th April 2013 -5th April 2014 as allowable expenses against the rental income.

    For example , you have annual rental income of 6000 and you have expenses including 3900 loan interest and 400 ( building insurance ) and 600 (letting agent fee ) so your taxable rental profit will be 6000 - 3900-400-600 = 1100

    If you have an off-set mortgage , the loan interest charged on you will vary by the amount in savings held in the offset account from month to month. So if you reduce the loan interest paid by say 900 over the year from 3900 to 3000 , your rental profit will increase by 900 and you may have to pay 20% extra on 900 loan interest saved.

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  • BLG
    started a topic Tax impact of offset mortgages

    Tax impact of offset mortgages


    I am considering taking an offset mortgage on my own home in order to purchase an investment property.

    I understand I can claim tax relief on the interest on this loan but I am not sure on what happens if I have money offsetting this loan in my current account and then remove the money.

    For example, say I have a £100k offset mortgage and zero in my current account. If I pay £50k into my current account I understand I can then claim only £50k of interest relief on the loan. What happens if 3 months later I then remove the £50k from my current account and purchase equities with it. Could I then go back to claiming £100k interest relief on the investment property? Likewise for my salary, if i pay this in at the start of the month and then spend it throughout the month will this limit the maximum amount I can claim?


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