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Do Mortgage Arrangement Fees count as Interest for tax

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Author Topic: Do Mortgage Arrangement Fees count as Interest for tax  (Read 81 times)
Newbie
Posts: 20

I like property

« on: August 06, 2020, 02:17:43 PM »

Hi,
I am in the process of switching an existing mortgage with TMW to a new deal. Some deals are free of arrangement fees and are generally around 3.00% but they are offering a 1% deal for one year with a 2% fee. Both deals work out at around the same amount of overall cost but I'm wondering because interest payments are capped at a 20% tax allowance is the arrangement fee regarded as interest or an expense tax wise?

Hope that makes sense.

Many thanks
Global Moderator
Sr. Member
Posts: 465

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« Reply #1 on: August 10, 2020, 05:10:08 PM »

It's treated as a cost of finance i.e. allowable at 20% in the same way as interest. Otherwise you'd be seeing a lot of BTL mortgages with very low rates but spectacularly large arrangement fees..

https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords
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