Mortgage on own home deductible?

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    #16
    Originally posted by jt2007 View Post
    it was 200k
    That will be the maximum for which interest cn be claimed for that borrowing.

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      #17
      so if I free up 100k from my house and increase my mortgage to 300k but only put 100k on the flat I can still claim TWO thirds of the interest for the flat?! not one third cos im only giving one third to the flat?!

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        #18
        You can only claim the proportion of interest that is on the value brought in to the business.

        So if you use £100,000 (of a total £300,000 residential mortgage) to pay off the BTL mortgage on the rental flat, you could claim 1/3 of the residential mortgage interest as an allowance against income tax.

        If you took the route of your second post and increased the mortgage on the rental flat to £150,000 and used the £50,000 to pay your residential mortgage down to £150k
        and then increased the residential mortgage to £300,000 you could pay off the BTL mortgage and claim half the residential mortgage interest as an allowance.

        You'd have to account for the £50k release from the BTL equity as income though, which would hurt.
        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).

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          #19
          I understand thanks. I actually put 50 k of my savings already knto the flat therefore by my option 2 if I re release that 50k is it still an income? it was my former home you see and I had to put the 50k on to get a better BTL deal

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            #20
            in hindsight if I had put that 50k on te residential first and then a week later re released it and put it on the flat I could have claimed a proportion of the residential interest against the flat income couldn't I? as it is that 50k went directly on the flat. is there anything tax deductible I can claim for putting that money dkrectly on tje flat by saying it could have gone on the house and been released a week later for the flat or have I missed this opportunity to save on tax?

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              #21
              By putting your savings into the BTL you can't recover them before you sell the property without paying income tax (unless you have no other income and can extract it below the income tax threshold each year).
              To get it out more efficiently, sell the property for what you bought it for or more and you'll get your invested savings back as equity.
              Then buy another property with a higher mortgage % of the value.

              I think you're over focussing on the tax "saving".
              Because tax is "charged" at a percentage of earnings with some allowances deducted (and that tax rate percentage currently doesn't go higher than 45%),
              any cost that you incur to "save" tax is going to be higher than the tax saved.

              Let's add £50k to a residential mortgage at a cost of (say) £2k in interest a year and invested the £50k in your BTL
              You could then claim £2k as an allowance against rental income, but you're still going to pay the £2k in interest - and you're only going to reduce the tax you pay by a percentage of £2k.
              If you were a higher rate tax payer, the £2k allowance is worth £800 in tax "savings", if you're paying 20% tax, half that.
              So, yes, some of your additional cost is being subsidised by HMRC which is nice, but you're still paying out more money every year.
              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).

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                #22
                im in the higher earning bracket but based on what you're saying I may leave things. even the interest of 50k in a bank (which I think is what u mean) sounds to compmicated to explain the taxman. or is this common practice? im not sure what this claim would come under

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