Mortgage on own home deductible?

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    Mortgage on own home deductible?

    I have a number of BTL properties in my own name and others in a company I own.
    I am thinking of raising some cash to buy some more and was wondering if I could take advantage of the lower rates on personal own-home mortgages compared with BTL.
    I do not currently have a mortgage on my own home so it might offer an opportunity, but is there any way at all I would be able to deduct the interest I pay against rental income? If not, that might well tip the balance back towards BTL mortgage instead.

    #2
    The short answer is Yes.

    Comment


      #3
      Thanks, King Maker. Any clues how?

      Comment


        #4
        Originally posted by MickyV View Post
        Thanks, King Maker. Any clues how?
        By deducting it when you submit your Self Assessment form to HMRC in exactly the same way that you'd deduct BTL mortgage interest. Obviously it'd be a good idea to keep records of the transfers which clearly show that the money was used for your BTLs just in case HMRC ever query it.

        Comment


          #5
          You can only claim the allowance as you bring the capital into the business.
          So if you mortgage in January and that delivers £200k and the first property is bought in March for £100k and the second for the same amount n June, you would offset 50% of the interest payment from March and the rest from June.
          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


            #6
            my perhaps over simplified understanding is that if any interest costs are allowable against IT then they are, it is irrelevant where the money comes from. so in your case, interest on 'the lending' is allowable,

            Comment


              #7
              Originally posted by jpkeates View Post
              You can only claim the allowance as you bring the capital into the business.
              So if you mortgage in January and that delivers £200k and the first property is bought in March for £100k and the second for the same amount n June, you would offset 50% of the interest payment from March and the rest from June.
              This is a good question, actually.
              When you "finance the business", I think that it is not uncommon to first get a loan, then to actually spend the money later. In that case the cost of the loan is allowable immediately and not from when the money is spend (please someone correct me if I'm wrong).

              Therefore if the mortgage is taken for the purpose of financing the BTL business I am not sure that its cost is allowable only whenever the money is actually spent by the business.

              Comment


                #8
                Thanks everybody who has contributed here - really helpful.

                Comment


                  #9
                  If you are a higher rate payer, it can be advantageous to purchase the next BTL in your property investment company.

                  This because Corporation Tax is 20%/21% , but the interest is allowable for Income Tax at 40%/45%.

                  I recommend that you discuss the matter with your accountant.

                  Comment


                    #10
                    Originally posted by jjlandlord View Post
                    ...Therefore if the mortgage is taken for the purpose of financing the BTL business I am not sure that its cost is allowable only whenever the money is actually spent by the business.
                    It would depend on the facts of the specific case - I was being a little black and white, and your point is a good one.
                    • If you raised a mortgage on your own house and put the funds into a separate bank account and clearly didn't intermingle the funds with your own, then purchased some properties fairly soon, I think your case would be pretty clear.
                    • If you took the funds and put them into your own bank account and went on holiday or bought a family car, the case would be less clear, even if you subsequently bought properties to rent for the full mortgage value.
                    • If you took the funds, kept them separate, but then were unable to find a suitable property for some months, again, you may have an issue.


                    There are things you can do to help yourself - the lender would normally ask on an application form what the purpose of the mortgage is and that would be very influential.
                    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


                      #11
                      Yes - drawing down the funds but not utilising them immediately could cause problems.

                      Comment


                        #12
                        sorry to hijack but on a similar note...if I have 200k left on my residential mortgage but remortgage to raise 100k and pay off a flat I rent out currently on a buy to let mortgage that leaves me with a 300k residential mortgage.am I then allowed to use a third of the interest on the mortgage payments as a tax deductible rental expense or all of it?

                        Comment


                          #13
                          using that example. if I could take 50k equity out of the flat increasing the btl debt to 150k and transfer that 50k to the residential mortgage what is tyere to stop me a week later taking 150k from the residential mortgage and paying off the flat and so making use of the now higher ratio of interest payment from the residential that can be attributed to the flat? ie instead of one third of the interest payments from the residential being offset against the flat income I now have a greater proportion I have used 150k to pay off the flat and not 100k just by transferring some flat equity to the residential first

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                            #14
                            What was the value of the property when it was first let?

                            Comment


                              #15
                              it was 200k

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