Mortgage interest relief?

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Mortgage interest relief?

    Can someone here please explain to me how the new changes to mortgage interest relief work?
    If I receive rent of 9000 a year and my mortgage interest is 5000 a year then I would expect to be taxed on 4000, which at 20% would be 800 a year. (Ignoring any other deductions).
    Is this still correct or has this changed?
    Thanks

    #2
    They're being phased in over the next four years, but the end position will be:
    You'll be taxed on the £9,000 income at your normal rate of tax.
    You'll be able to deduct from the tax due an allowance of 20% of the interest (whatever rate of tax you pay).

    Today:
    rent is £9000
    interest is £5000
    you pay tax on £4000 (so £800 for a base rate payer or £1600 for a higher rate payer).

    Future:
    rent is £9000
    interest is £5000
    you pay tax on £9000 (so £1800 for a base rate payer or £3600 for a higher rate payer).
    less an allowance of £1000 (so end result of £800 for a base rate payer or £2600 for a higher rate payer.)

    The messy bit is if the £9000 income takes you into being a higher rate tax payer, because that can happen.
    Which also moves you into a higher band for CGT.
    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


      #3
      Thanks the the explanation. As I am a standard tax payer it makes no difference to me. I assume those with several properties will be pushed into the higher tax payer band and will see them paying more tax?? Is this likely to mean some people selling up?

      Comment


        #4
        I have 7 properties let but it won't push me into the higher tax band by itself.

        In 2019 I can take some pensions without penalty and the combination would so I intend to see a former home (reduced CGT) and pay down mortgages with the proceeds.

        Comment


          #5
          Aren't the pensions being taken tax free?
          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
            Originally posted by jpkeates View Post
            Aren't the pensions being taken tax free?
            Wish they were: I pay tax on my various pensions, including state pension...or were you referring to payment to a pension fund??
            I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

            Comment


              #7
              I was referring to the 25% tax free sun that can be taken.
              Usually taking anything else can be punitive...
              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


                #8
                Originally posted by landlord2b View Post
                Thanks the the explanation. As I am a standard tax payer it makes no difference to me. I assume those with several properties will be pushed into the higher tax payer band and will see them paying more tax?? Is this likely to mean some people selling up?
                Hello. I think there will be consequences. I sold two units myself.

                There are other consequences - Cost of debt. Leverage ratios. Rent rises. The main thing is: It will be more difficult to buy property.

                I put a lot of effort into writing this on out of hours. People have found it quite useful to understand the mechanics and wider impacts:

                http://www.comfortlettings.co.uk/blo...x-consequences
                I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.

                That also means I cannot share in any profits from any decisions made!

                Comment

                Latest Activity

                Collapse

                • Recent tax return
                  by Ailers
                  Hi, new here, sorry if this has been asked already but I can't find the answer.

                  I have just completed my tax return for 2020/21 as a landlord with a few properties. My income was 22k and my outgoings (maintainance, ground rent, insurance, mortgage payments etc) was 18k. The mortgages are...
                  24-01-2022, 22:42 PM
                • Reply to Recent tax return
                  by jpkeates
                  I suspect that you completed the return incorrectly.
                  25-01-2022, 09:30 AM
                • Reply to 50/50 ownership versus rental split
                  by AndrewDod
                  Yes (if you are spouses)
                  Probably wise to use a lawyer
                  CGT not relevant as you can freely transfer between spouses for CGT purposes (even shortly before a sale)...
                  25-01-2022, 08:52 AM
                • 50/50 ownership versus rental split
                  by Deeks67
                  Hi guys , I have recieved some inaccuratre advice ( not from this site ) RE ownership and rental income split . my wife and I have 2 unemcumbered properties which are renting out , the first started renting in Oct 2020 and the second started in July 2021 . Both properties are in joint names 50/50 (...
                  25-01-2022, 06:24 AM
                • Tax return
                  by pchaure
                  Hi
                  New to this, buy to let property got in 2018 but renewing took time and COVID hit. Rented out since Dec 2020. I had Electrical work done completed in 2019, as had no income I had not filled in self assessment. Can I claim it in this tax year?
                  24-01-2022, 19:05 PM
                • Reply to Tax return
                  by jpkeates
                  If it was first let in December 2020, the costs allowable against income prior to that take place on the first day of the first tenancy for tax purposes.

                  So, if you mean can you claim it on a tax return for April 2020 to April 2021, the answer is yes.
                  You can't claim it for this tax...
                  24-01-2022, 21:10 PM
                • Reply to Advice
                  by SouthernDave
                  I started my limited company a year before buying the first property, then bought a second 2 months later, a third 3 months after that, a fourth 5 months after that and so on to where I am now. Our lenders have never said they want a separate company per property. Ive never heard of that, if it were...
                  23-01-2022, 17:40 PM
                • Advice
                  by jhoggard
                  Hi,

                  I currently have a property rented out in my own name with a fair bit of equity around 50% LTV this is actually a repayment mortgage which i'm looking to switchover to a interest only. When i do this i'm also taking money out of the property to put towards another which i'm looking...
                  20-01-2022, 14:25 PM
                • Reply to Advice
                  by jpkeates
                  I don't think we disagree.

                  The OP has one property and is looking to buy a second.
                  At that point in that business, lenders will want a company per property.

                  There's a point where that ceases to be the case, when the portfolio gets big enough, or, presumably when someone...
                  23-01-2022, 17:34 PM
                • Reply to Advice
                  by SouthernDave
                  i concur with James, once you get over 4 properties, they consider you to be a portfolio landlord and want to start seeing cashflow forecasts before lending to make sure the company is buoyant. Directors guarantees each time but no limits on number of properties or number of dofferent lenders.
                  23-01-2022, 16:50 PM
                Working...
                X