So how long until the tax man comes down hard on landlords?
Discussion
Welshbeef said:
...... if you have your own residential mortgage, up the ltv on the buy to let while dumping the equity released into your residential mortgage therefore little or no tax due.
Or words to that effect.I enquired about this and was informed that it's a no no.
You can only claim tax relief on the interest payments directly relating to the original loan used to buy the house in the first place.
If you subsequently remortgage to a higher LTV, use some of the money to decrease the capital outstanding on your residential mortgage and claim tax relief on the rest, you're being naughty.
All tax relief has to relate to the original loan used to purchase the property.
I'm happy to be corrected if this is not the case.
Couldn't a disgruntled tenant just grass the landlord up to the revenue or the lender?
IR scares me so I err on the side of caution, early this year I started renting a few rooms out in the my flat and even apportioned the expenses to the rented rooms as oppose to just deducting the full expenses from the rental income.
IR scares me so I err on the side of caution, early this year I started renting a few rooms out in the my flat and even apportioned the expenses to the rented rooms as oppose to just deducting the full expenses from the rental income.
RichyBoy said:
Couldn't a disgruntled tenant just grass the landlord up to the revenue or the lender?
IR scares me so I err on the side of caution, early this year I started renting a few rooms out in the my flat and even apportioned the expenses to the rented rooms as oppose to just deducting the full expenses from the rental income.
grass them up for what?IR scares me so I err on the side of caution, early this year I started renting a few rooms out in the my flat and even apportioned the expenses to the rented rooms as oppose to just deducting the full expenses from the rental income.
They are a tennant. They put their own names down on the electoral role they have a receive a gas cert every year deposit has to be handled by a thrid party
no tennant would know if a landlord was or was not declaring his rental income odd to suppose they would not be.
Welshbeef said:
grass them up for what?
They are a tennant. They put their own names down on the electoral role they have a receive a gas cert every year deposit has to be handled by a thrid party
no tennant would know if a landlord was or was not declaring his rental income odd to suppose they would not be.
There's a fair clue that all may not be above board when the landlord's bank statements are still coming to the house that you're now renting from them. They are a tennant. They put their own names down on the electoral role they have a receive a gas cert every year deposit has to be handled by a thrid party
no tennant would know if a landlord was or was not declaring his rental income odd to suppose they would not be.
VernalEquinox said:
Welshbeef said:
grass them up for what?
They are a tennant. They put their own names down on the electoral role they have a receive a gas cert every year deposit has to be handled by a thrid party
no tennant would know if a landlord was or was not declaring his rental income odd to suppose they would not be.
There's a fair clue that all may not be above board when the landlord's bank statements are still coming to the house that you're now renting from them. They are a tennant. They put their own names down on the electoral role they have a receive a gas cert every year deposit has to be handled by a thrid party
no tennant would know if a landlord was or was not declaring his rental income odd to suppose they would not be.
The key thing though if your a tennant get the electoral role remove him from it and replace with people who live in the house. Likewise with council tax you should always inform them it's a rented house.
Still to me it is the naive landlord who doesn't do it properly as it shouldn't cost a thing if done properly.
Best way I guess is with dodgy landlords who clearly have a residential mortgage without permission to let change of electoral role will begin to ring alarm bells plus a letter to said mortgage provider from tennant will cause a whole load of grief and probably lead to the mortgage being called in without much notice
So do we have an answer to this point?
I said "You can only claim tax relief on the interest payments directly relating to the original loan used to buy the house in the first place.
If you subsequently remortgage to a higher LTV, use some of the money to decrease the capital outstanding on your residential mortgage and claim tax relief on the rest, you're being naughty.
All tax relief has to relate to the original loan used to purchase the property."
I'd be very interested to know if you can just borrow £1000s on a property you are renting AFTER HAVING PAID OFF THE ORIGINAL LOAN and reclaim the tax on the interest on the new loan.
I said "You can only claim tax relief on the interest payments directly relating to the original loan used to buy the house in the first place.
If you subsequently remortgage to a higher LTV, use some of the money to decrease the capital outstanding on your residential mortgage and claim tax relief on the rest, you're being naughty.
All tax relief has to relate to the original loan used to purchase the property."
I'd be very interested to know if you can just borrow £1000s on a property you are renting AFTER HAVING PAID OFF THE ORIGINAL LOAN and reclaim the tax on the interest on the new loan.
Well that's very interesting.
Eric thought differently.
If you are both correct and this is common practice (and legal), then there must be a lot of people who are living mortgage free in their residential property having borrowed the money to pay off the residential mortgage against their rental property or properties.
Plus they're getting tax relief on the interest component of the mortgage(s) for the rental properties.
Sounds too good to be true.
Don't believe it.
Eric thought differently.
If you are both correct and this is common practice (and legal), then there must be a lot of people who are living mortgage free in their residential property having borrowed the money to pay off the residential mortgage against their rental property or properties.
Plus they're getting tax relief on the interest component of the mortgage(s) for the rental properties.
Sounds too good to be true.
Don't believe it.
rfisher said:
Well that's very interesting.
Eric thought differently.
If you are both correct and this is common practice (and legal), then there must be a lot of people who are living mortgage free in their residential property having borrowed the money to pay off the residential mortgage against their rental property or properties.
Plus they're getting tax relief on the interest component of the mortgage(s) for the rental properties.
Sounds too good to be true.
Don't believe it.
If the subsequent loan secured against the property is used for reasons other than the rental 'business' the costs of the interst on the loan can't be offset against the rental income. If you spent the secondary loan on extensions or improvements you could.Eric thought differently.
If you are both correct and this is common practice (and legal), then there must be a lot of people who are living mortgage free in their residential property having borrowed the money to pay off the residential mortgage against their rental property or properties.
Plus they're getting tax relief on the interest component of the mortgage(s) for the rental properties.
Sounds too good to be true.
Don't believe it.
The fact that the money you are borrowing is secured on the property is irrelevent - it's what you use the money for that matters.
Interest is allowable for tax purposes on the basis of what the loan was for.
If the loan was to buy a rental property, set up a business, acquire a buisiness asset etc, then the interest can be offset against the rental profits, business profits etc.
If you take out a loan to buy your own residence then you cannot use the interest on that loan against rental or business income (or any other kind of taxable income for that matter).
If you extend an existing loan that had ORIGINALLY been taken out to fund a business or a rental property but the EXTENDED aspect of the loan does not relate to a business or a rental property, then THAT PORTION OF THE INTEREST relating to the additional loan amount will not be offsetable for tax purposes.
If the loan was to buy a rental property, set up a business, acquire a buisiness asset etc, then the interest can be offset against the rental profits, business profits etc.
If you take out a loan to buy your own residence then you cannot use the interest on that loan against rental or business income (or any other kind of taxable income for that matter).
If you extend an existing loan that had ORIGINALLY been taken out to fund a business or a rental property but the EXTENDED aspect of the loan does not relate to a business or a rental property, then THAT PORTION OF THE INTEREST relating to the additional loan amount will not be offsetable for tax purposes.
Eric Mc said:
If you extend an existing loan that had ORIGINALLY been taken out to fund a business or a rental property but the EXTENDED aspect of the loan does not relate to a business or a rental property, then THAT PORTION OF THE INTEREST relating to the additional loan amount will not be offsetable for tax purposes.
Thanks for the clarification, Eric. One (related) point to note is that one should always overpay one's residential mortgage in preference to the BTL, if one finds oneself with additional funds, precisely so you don't decrease the original loan of the BTL property and hence reduce the interest payments you can offset against tax.
I'm well out of the BTL game now anyway, so it's no longer relevant to me personally but I thought I'd mention it.
JonRB said:
Eric Mc said:
If you extend an existing loan that had ORIGINALLY been taken out to fund a business or a rental property but the EXTENDED aspect of the loan does not relate to a business or a rental property, then THAT PORTION OF THE INTEREST relating to the additional loan amount will not be offsetable for tax purposes.
Thanks for the clarification, Eric. One (related) point to note is that one should always overpay one's residential mortgage in preference to the BTL, if one finds oneself with additional funds, precisely so you don't decrease the original loan of the BTL property and hence reduce the interest payments you can offset against tax.
I'm well out of the BTL game now anyway, so it's no longer relevant to me personally but I thought I'd mention it.
pilchardthecat said:
JonRB said:
Eric Mc said:
If you extend an existing loan that had ORIGINALLY been taken out to fund a business or a rental property but the EXTENDED aspect of the loan does not relate to a business or a rental property, then THAT PORTION OF THE INTEREST relating to the additional loan amount will not be offsetable for tax purposes.
Thanks for the clarification, Eric. One (related) point to note is that one should always overpay one's residential mortgage in preference to the BTL, if one finds oneself with additional funds, precisely so you don't decrease the original loan of the BTL property and hence reduce the interest payments you can offset against tax.
I'm well out of the BTL game now anyway, so it's no longer relevant to me personally but I thought I'd mention it.
pilchardthecat said:
Fairly certain you can draw down overpayments on the initial loan
You're only charged interest on the outstanding loan amount. Therefore reducing the loan by any means will reduce the interest payment and hence what you can offset against tax.What I was saying is that if you found yourself with a surplus or £1000 and had both a residential and BTL mortgage (on two respective properties, obviously) then it makes far more financial sense to overpay the residential mortgage.
JonRB said:
pilchardthecat said:
Fairly certain you can draw down overpayments on the initial loan
You're only charged interest on the outstanding loan amount. Therefore reducing the loan by any means will reduce the interest payment and hence what you can offset against tax.What I was saying is that if you found yourself with a surplus or £1000 and had both a residential and BTL mortgage (on two respective properties, obviously) then it makes far more financial sense to overpay the residential mortgage.
But yes, which debt you choose to pay off with your rofit is entirely up to you. The purpose of the 'loan' wouldn't matter in this case
Edited by pilchardthecat on Thursday 19th August 15:12
pilchardthecat said:
Eric Mc said:
The PURPOSE of the loan absolutely matters for tax purposes.
Not if you are drawing down a prior overpayment of the original loan.I'd suggest there are more tax efficient vehicles for using that extra money than overpaying the BTL mortgage.
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