If I remortgage my residential property - tax situation

[shindha]

If I was to remortgage my house to fund a to let property can I get tax relief on the repayments?
Thanks for looking.

[Vixpy1]

You can offset the interest part of the repayment only against the income. AFAIK

[Eric Mc]

Correct.

Obviously, if it's an interest only morgage, then the repayments will be the same as the interest.

[GT03ROB]

Wouldn't the mortgage need to be against the BTL property, to qualify for the tax relief?

[Eric Mc]

GT03ROB said:

Wouldn't the mortgage need to be against the BTL property, to qualify for the tax relief?

The loan does niot have to be secured against the rental property. Tax relief is based on the PURPOSE of the loan, not how the loan was obtained or secured.

[GT03ROB]

Eric Mc said:

GT03ROB said:

Wouldn't the mortgage need to be against the BTL property, to qualify for the tax relief?

The loan does niot have to be secured against the rental property. Tax relief is based on the PURPOSE of the loan, not how the loan was obtained or secured.

Interesting never realised that. Silly quesion then how do you prove the purpose of the loan?

[Eric Mc]

GT03ROB said:

Eric Mc said:

GT03ROB said:

Wouldn't the mortgage need to be against the BTL property, to qualify for the tax relief?

The loan does niot have to be secured against the rental property. Tax relief is based on the PURPOSE of the loan, not how the loan was obtained or secured.

Interesting never realised that. Silly quesion then how do you prove the purpose of the loan?

Generally, there will be paperwork supporting the loan application which would need to be produced as evidence if HMRC ask to see that evidence. That is the essence of the "Self Assessment" system i.e. the taxpayer makes the claims and, by and large, is not queried on these claims - unless HMRC decides to open an enquiry into some aspect of his/her Self Assessment returns.

Think of all those business loans that are secured on the director's or proprietor's home. It would be very cruel if the business could not claim interest on those loans purely because the loan was secured on a non-business asset.

[GT03ROB]

Eric Mc said:

Generally, there will be paperwork supporting the loan application which would need to be produced as evidence if HMRC ask to see that evidence. That is the essence of the "Self Assessment" system i.e. the taxpayer makes the claims and, by and large, is not queried on these claims - unless HMRC decides to open an enquiry into some aspect of his/her Self Assessment returns.

Think of all those business loans that are secured on the director's or proprietor's home. It would be very cruel if the business could not claim interest on those loans purely because the loan was secured on a non-business asset.

Thanks, never thought of it quite like that, but so obvious really!

[shindha]

Thanks for all the replies my thoughts were the same but a friend said that this was not so. Will be speaking to an accountant to verify.

[Cheib]

shindha said:

Thanks for all the replies my thoughts were the same but a friend said that this was not so. Will be speaking to an accountant to verify.

I would do so....you would certainly have to be careful how all the cash is moved around etc. HMRC are actually pretty helpful if you just give them a call....

[sumo69]

Eric is 100% correct - the security for the loan is irrelevent, solely its purpose and use.

D

[shindha]

Spoke to my old accountant and he has confirmed what I suspected and what every body here has said.