Rental mortgage tax relief Q
Discussion
Hi
I know that you can account for the interest portion of the mortgage payments as an 'overhead' and not the capital repayment part but my next rental property is on a repayment mortgage rather than IO so I'm unsure how to calculate this amount.
Is it a case of getting a statement from the mortgage company each year or is there an alternative way?
Also, does anyone have a good excel sheet to manage their portfolio with?
TIA
I know that you can account for the interest portion of the mortgage payments as an 'overhead' and not the capital repayment part but my next rental property is on a repayment mortgage rather than IO so I'm unsure how to calculate this amount.
Is it a case of getting a statement from the mortgage company each year or is there an alternative way?
Also, does anyone have a good excel sheet to manage their portfolio with?
TIA
Every year, on the anniversary of the mortgage being taken out, the mortgage company will provide you with a statement which will show the total amount repaid, the total interest element of the repayments and the balances on the mortgage at the start and end of the year.
The one problem with these statements is that they are usually issued on the anniversary of the mortgage, not in line with the tax year end.
In the "old" days, it was common for a taxpayer to contact the mortgage lender and ask for the bank/building society to provide a certificate of interest charged for the relevant tax year. I hardly ever see such documents now - but I can't see why a mortgage lender shouldn't be able to provide this if asked.
What I tend to have to do these days, when working out the interest applicable to a particular tax year, is review these anniversary statements provided by the mortgage lender and then apportion the interest charges properly into the relevant tax year.
The one problem with these statements is that they are usually issued on the anniversary of the mortgage, not in line with the tax year end.
In the "old" days, it was common for a taxpayer to contact the mortgage lender and ask for the bank/building society to provide a certificate of interest charged for the relevant tax year. I hardly ever see such documents now - but I can't see why a mortgage lender shouldn't be able to provide this if asked.
What I tend to have to do these days, when working out the interest applicable to a particular tax year, is review these anniversary statements provided by the mortgage lender and then apportion the interest charges properly into the relevant tax year.
Fotic said:
Thanks. As I thought but with possibly a bit of jiggery pokkery to come to the correct figure if the statement isn't in line with the tax year.
Yes. The problem is that you will need two annual statements to be able to obtain the information. This might cause you a delay in being able to submit the tax return as you wait for the second statement to arrive.When I had a mortgage, my statement arrived every November (as I took my mortgage out in the month of October).
If that was the case for a person claiming loan interst for (say) tax year 2014/15, they would need the statements covering the year ended 30 November 2014 AND the year ended 30 November 2015.
November 2015 is not that far from the 2014/15 self assessment on line filing deadline of 31 January 2016.
If the taxpayer was submitting a paper tax return they would have a problem as the filing date would be 31 October 2015 i.e. BEFORE they had all the relevant data.
In a situation like that, you would HAVE to contact the lender to obtain a certificate of interest specifically covering the TAX year ended April 2015.
selym said:
It used to be called a MIRAS 5 if I remember rightly. Your mortgage company will calculate the interest portion for you.
MIRAS was nothing to do with rental properties. MIRAS (which stood for Mortgage Interest Relief at Source) was in connection with the house you lived in. Once upon a time, people obtained tax relief for the interest they paid in respect of the home they lived in.Interest on loans for rental properties was never obtained "At Source" so a MIRAS certificate would not be the appropriate piece of paper.
What was required was a simple certificate showing the actual interest charge by the lender up to 5 April. The tax relief was/is obtained by deducting the interest paid in the tax year from the overall rental income as an allowable rental cost.
In other words, the tax relief was/is obtained through the rental income and expenditure accounts, not through any sort of "At Source" calculation (which was the case with home mortgages).
Eric Mc said:
MIRAS was nothing to do with rental properties.....
Wrong. The MIRAS 5 form was suggested as the best for of evidence for interest paid in a financial year by......wait for it.......HMRC. I've been doing this for seventeen years Eric. Until the aforementioned for was phased out, it was perfect for the OPs requirement. Don't be so quick to be a smartypants.
selym said:
Wrong. The MIRAS 5 form was suggested as the best for of evidence for interest paid in a financial year by......wait for it.......HMRC.
I've been doing this for seventeen years Eric. Until the aforementioned for was phased out, it was perfect for the OPs requirement. Don't be so quick to be a smartypants.
Eric a smartypants? I think you must be confusing him with someone else.I've been doing this for seventeen years Eric. Until the aforementioned for was phased out, it was perfect for the OPs requirement. Don't be so quick to be a smartypants.
selym said:
Wrong. The MIRAS 5 form was suggested as the best for of evidence for interest paid in a financial year by......wait for it.......HMRC.
I've been doing this for seventeen years Eric. Until the aforementioned for was phased out, it was perfect for the OPs requirement. Don't be so quick to be a smartypants.
They might have recommended getting a MIRAS form, but it was a bit of a fudge - because MIRAS did not apply to rental properties.I've been doing this for seventeen years Eric. Until the aforementioned for was phased out, it was perfect for the OPs requirement. Don't be so quick to be a smartypants.
The MIRAS certificate was established for home owners (to whom Morgtage Interest Relief at Source applied).
Since MIRAS is now abolished, there is obviously no point in asking for a MIRAS certificate from a lender these days.
However, there should be no reason why a lender cannot supply a more generic Statement of Interest Charged for the year ended 5 April - as lots of taxpayers still need to have this information for their Self Assessment tax returns.
The problem is that so few people ask for this information from lenders that the numpties in the bank/building society often don't really know what you are asking for or why - and they often just reissue to you the normal annual statement instead, which is not what was asked for.
I know they do - although why is it still called MIRAS when the concept no longer exists and it never applied in regards to rental properties anyway?
It's just silly.
Whatever it's called, I did tell the OP that such a certificate can be obtained from the lender - provided it's asked for.
It's just silly.
Whatever it's called, I did tell the OP that such a certificate can be obtained from the lender - provided it's asked for.
Eric Mc said:
I bet a lot of people who use the term today have no idea why it is called MIRAS and what its original purpose was.
It doesn't matter really. It has been used for tax purposes, as I did, for decades. When I say it, I mean the MIRAS 5 form which was the only part of the whole system which served my needs.It reminds me of the Isaac Asimov story where a computer does its job without having a clue about what its real purpose is. Its human operators try to explain to it the fallacy of its understanding of its true purpose but it refuses to accept their correct explanation.
In the end they give up as knowing what it is doing is not important to the robot, as long as it does it.
In the end they give up as knowing what it is doing is not important to the robot, as long as it does it.
Eric Mc said:
It reminds me of the Isaac Asimov story.....
It reminds me of aspirin. Used for curing headaches etc. but some bright spark realised it's alternative use to reduce the chance of strokes, heart issues and now cancer (?).You wouldn't not use it to avoid having a stroke, just because it was originally developed for pain relief?
selym said:
Eric Mc said:
It reminds me of the Isaac Asimov story.....
It reminds me of aspirin. Used for curing headaches etc. but some bright spark realised it's alternative use to reduce the chance of strokes, heart issues and now cancer (?).You wouldn't not use it to avoid having a stroke, just because it was originally developed for pain relief?
You do realise that Eric is never wrong, don't you? Even when he is totally incorrect about something he isn't wrong as such, he's just a different sort of right.
When he has got things so utterly round his neck that there is no aspect of his argument that could be considered correct it is only because the subject is silly, illogical or in some other regard not how it should be done.
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