Diesel

What view do the IR take if your mortgage interest repayments were suddenly to jump on a property you let - i.e after you have extended the mortgage on it and use that cash to repay the mortgage on your main home?

I know that there might be some CGT implications in the future, but it would seem better for ME to get the value of the equity in my LET property rather than the IR pi$$ers up the wallers of my hard earnt(ish)!!!

Cheers

D

fast bloke

You can only offset interest on the purchase price or initial mortgage against tax, so this is a non starter.

imlach

No can do.
You can't do this. Tax relief is available on the interest part of the mortgage at the date of purchase IIRC.

Otherwise, everyone would just keep remortgaging every few years to bump up the interest payment and use it for tax avoidance....

Will explain more later....but no

imlach

PS It would make no difference to CGT even if it was allowed. CGT is calculated using some complex formulas, but predominantly, is based on the purchase price at date of purchase. What you do inbetween buying it and selling it (unless you decided to live in it yourself as a primary property) is irrelevant.

Diesel

Ohh *****! Wish I'd maxed it BEFORE letting it. Can I sell it to my girfriend and she lets it; dohh stamp duty...

No solutions??? Interest on home improvement loans - new boiler maybe???

D

imlach

If I were you, I'd talk to an accountant. Seriously.

He will be able to tell you your best course of action to minimise your taxation. Every situation is different, and without knowing ALL your financial details, it is difficult, nigh on impossible, for us to tell you your best course of action.

It will cost, but probably save you more in the long term.

MartinM

But it is a standard way of extracting some money from the rental house if you've had it for a reasonable period of time.

OK, you don't get the tax relief on the interest, but:
- there's no CGT - you haven't sold anything...in fact you've just borrowed more!
- the rental income should be well covering the current mortgage, so should cover the higher mortgage and the additional payments are still being covered by someone else (A Good Thing)
- you might be able to sneak the rent up a bit to help out

YMMV of course, so you need a chat with someone qualified, as opposed to the barrack-room lawyers here on SN (me included)

Diesel

Thanks guys - I'll see if I can get like a half hour consultation with a good accountant maybe and sort a few things out. I used to have one, but it was very costly for really rather simple sole trader returns (£1k+ charges) that I'd lalready logged on Excel anyway; also any advice I requested always had hidden charges (just be open!) and was often woolly or inconclusive.

Are there any good ones (maybe on here?) that you know of - I really don't want to Yellow Page it!

Thanks a lot.

ProperCharlie

err...

fast bloke

Wouldn't matter - if you maxed it before letting it. The relief is based on purchase price or initial mortgage (just in case you got a 120% mortgage)

No simple ways to avoid it unfortunately - you could set up a company to manage the property and then employ your granny wot is on state pension as property manager. Company breaks even and granny doesn't have to pay tax etc etc - Ideally you should employ a housewife/husband and they can use their tax free allowance and 10% band, but as above - a decent accountant will find out about you in half an hour enough to save you a lifetime of hassle

Diesel

Luckily I got a 'creative' accountant recommended last night - thanks very much for your help on this though!