Interest relief following remortgage

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    Interest relief following remortgage

    If you bought a BTL property for £100,000 with a 85% interest only mortgage you can claim interest relief on all of the payments . 10 years later the property is worth £200,000 and you get another 85% interest only mortgage. Can you only claim interest relief on £100,000 as this was the value of the property when it entered the business?

    What about if the extra £70,000 is used to buy more property for the business?

    I've read that HMRC doesn't allow the revalued figure to be used but seems odd if all the money is reinvested in property that will generate an income that's subject to income tax.

    Thanks

    #2
    On your BTL No.1 , you can charge loan interest corresponding up to the value of the property at entering rental business against the rental income.

    On your BTL No.2, you can charge loan interest up to the value of the property at purchase date against the rental income.

    So if you raise 70K from 1st property to use as deposit for 2nd property, the loan interest for 70K ( plus interest paid for 2nd BTL mortgage ) is charged against the rental income of property 2.

    Comment


      #3
      Actually it's slightly better than that.

      While the "extra" £70,000 is only eligible for tax relief if used for the business, the original "extra" £15k (of the original £100k) can be spent on anything at all, and the tax allowance claimed on the interest.
      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


        #4
        Yes - the full £85,000 is tax deductible.

        Comment

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