Mortgage payments deductable?

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    Mortgage payments deductable?

    I am a non-resident landlord registered as such with the Inland Revenue, which has authorised my tenant NOT to deduct tax from rent payments. I recently contacted the IR's centre for non-residents to assess my tax liability for the past five years, since they had never sent me a self-assessment form and I was worried that I would one day be slapped with a massive tax bill.

    Someone at the centre's help desk said that my liability was nil because my profits were less than my personal allowance. She insisted that mortgage payments were deductable from my profits. The IR's website, however, seems to suggest that only INTEREST payments are deductable. I can find no mention of mortgage capital repayments. With my rental income currently 900 pounds/month I am sure that without deducting mortgage payments I am well over my personal allowance.

    I am worried that the help-desk person was wrong and that since I have nothing in writing that I may still be liable, despite having acted to try to settle any arrears.

    Any advice appreciated.

    #2
    I can categorically confirm that only mortgage interest is deductible and not the part which reduces the capital. Obviously one of you were confused and did not fully understand what the other was saying.

    If you are a British citizen and have your personal allowances intact, you will have this to set off against any rental profits left after deducting all allowable deductions, eg, insurance, safety certificate fees, furnishings wear & tear allowance (10% of gross rent), service charges, repairs & maintenance, etc.

    Ramnik
    Private advice is available for a fee by sending a private message.

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      #3
      mortgage payments

      Thanks, Ramnik. That's what I thought,

      (I am a British citizen).

      But having requested a self-assessment form from the Revenue (several months ago) and having been told (only verbally, mind) that I am deemed to have no liability, am I safe in letting the matter rest, or should I insist again that I believe I am in arrears? As far as the advice on the IR website goes (=you must fill in the self-assessment if it is sent out and ask for the form if you think you owe tax) I believe I have done my bit. Perhaps I should get something in writing from them.
      Anthony

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        #4
        As you correctly observe, you have to notify the Inland Revenue if you owe tax. At present you have no record of your notification. I suggest that you should write to the Inland Revunue office for non-residents and advice them that you believe that you are liable to tax on rental income. Keep a record of your notification.

        Ramnik
        Private advice is available for a fee by sending a private message.

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          #5
          Started renting partway through tax year

          The flat I used to live in has been rented out since Feb05, and my main residence is now elsewhere, but I have been paying mortage on it for about 2 years now.

          My question is, what period can I deduct my mortgage interest for - the whole self assessment tax year, or just the time where the property is actually rented out?

          The same question for costs like service charges and so on.

          I'm guessing it'll be 'for the period actually rented', but it would be nice if it was the whole year!

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            #6
            I would imagine it would be "the entire period the property is owned for the purpose of renting". So it would include, obviously, when it is let, and ALSO when the property is empty between lets. However, I would very much doubt that you can include when you lived there, I think the IR would take exception!! :P
            Any posts by myself are my opinion ONLY. They should never be taken as correct or factual without confirmation from a legal professional. All information is given without prejudice or liability.

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              #7
              Ah... that is useful. Thank you very much.

              It took me a while to get round to sorting out getting the property let after I left, but basically the time from me leaving the place as my main residence and tenants moving in is 'owned for the purpose of letting' then.

              This same logic applies to services charges and so on?

              Comment


                #8
                I would guess so eggy, but I am no expert so would double check with, perhaps, the IR first...give them a call. It would seem reasonable that if the property was empty while you were looking for tenants that that should count, but if it was empty because you were still moving stuff out etc then it wouldnt. But as I say you need to check properly.
                Any posts by myself are my opinion ONLY. They should never be taken as correct or factual without confirmation from a legal professional. All information is given without prejudice or liability.

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                  #9
                  Rules for letting are now based on trading. The main question would be when did your letting business commenced. This would be the date from which all expenses and mortgage interest would be deductible.

                  Like in all walks of life, there are a lot of grey areas. So long as people are reasonable, there is normally no problems.

                  Ramnik
                  Private advice is available for a fee by sending a private message.

                  Comment


                    #10
                    Thanks Karongo.

                    I'll view the date that my letting business commenced as the time from when the property was actually put onto the letting market and advertised to prospective tenants. Before that it was just kind of laying fallow.

                    This date is actually several months before the property was occupied by tenants, but the property was definately solely owned "for the purpose of renting" at that point, so that should be reasonable I think.

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                      #11
                      I would say so.

                      Ramnik
                      Private advice is available for a fee by sending a private message.

                      Comment

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