SMF - Just Installed!

Mortgage interest

Started by Bazza78, November 16, 2024, 06:04:14 PM

Previous topic - Next topic

Bazza78

Hello,

I'm a new landlord and need some advice please. I am renting out my home as I am moving away for work for a couple of years.

I have read that the interest on my mortgage might be an allowable expense. My mortgage is just a normal, private mortgage which I have had since I bought the property ten years ago. I didn't expect to rent out my home but life changes sometimes.

Is this interest something I can claim as an allowable expense or is that not possible due to it been a private mortgage and not a business one so to speak?

Many thanks.

South-West

You must notify your Lender that you will be letting your property - they "may" insist you move to a BTL loan.

Bazza78

Yes, I have alreadt got consent to lease sorted. I just need to know if I can claim the interest on my normal mortgage? Thanks.

jpkeates

You can claim the interest element of the mortgage as a restricted allowance against income tax. The allowance is restricted to the basic rate of tax (ie. 20%) and is deducted after tax has been calculated.

Bazza78

Thank you, that's very helpful. So, if the total interest is £4,800 I can claim 20% of this against my 'profit'?

jpkeates

Not exactly. You calculate the tax you owe, and then you can deduct the 20% from the tax amount owed.

That can't make the amount owed less than zero.

Bazza78

Ah, ok, I get it. Just to be absolutely sure - it doesn't have to be a buy to let mortgage, any mortgage is ok?

Thanks.

jpkeates

As long as the property is part of a letting business, which it will be.

Bazza78

No, it is not a business at all - I have just rented my own home just whilst I work away. This is why I am confused and need absolute clarity.

Surely I don't need to set up as a self employed property owner for this rental income?


jpkeates

Letting a property is a business for tax purposes.  Which is why you can claim expenses incurred in the course of the business against income and tax.

And no, you don't have to be self employed, it's an investment business, not a trade. But don't underestimate what you're doing. This isn't a casual side hustle, you're providing someone a home, and they have a whole shedload of rights and you have a lot of responsibilities.

If you need "absolute clarity" though, talk to an accountant.