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Remortgage a flat and get tax relief?

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Author Topic: Remortgage a flat and get tax relief?  (Read 132 times)

Jazzert1000

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« on: April 07, 2021, 01:27:48 AM »
I am looking to remortgage a flat,this would put it into a loss making property, rent £400 mortgage £545, my other flat would continue in profit of £390  a month.
What would be the best way to present this to HMRC?
Obviously I want to minimise any tax payable.

Hippogriff

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« Reply #1 on: April 07, 2021, 07:53:15 AM »
Has the Lender even agreed to that? Usually they would not on a BTL mortgage... that's part of why they send Surveyors around... to assess that rental income is more than mortgage payment. I know because I've gone through it myself.

Hippogriff

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« Reply #2 on: April 07, 2021, 09:20:31 AM »
I thought a little more about this... and it's true that every now and again one of my properties makes a notional loss... like when I had to replace a boiler and a blown-down garden fence in a property one year, this took me into the red - for that property - but that didn't change anything about how I reported things to HMRC in my Self Assessment... the idea of a business as a whole was still presented as rental income vs. allowable expenses, as a whole. And that's also what Lenders want to see... they don't wish to see a breakdown of your business, property by property, when you're asking for a new mortgage, for example... what they want to see is your tax returns - and validate that you've actually paid tax each year... if you've paid tax each year then it means your business is profitable and a pretty good bet for them to lend on.

If your tax returns show you paying no tax, or getting refunds, each year... then why would a Lender want to throw more money after bad? Unless you're Amazon in the late 90s.

Jazzert1000

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« Reply #3 on: April 08, 2021, 01:29:21 AM »
Up until now I have made 9% gross over the past 7 years and have been taxed accordingly,  I have received  multiple mortgage  offers based on the criteria I supplied.
I have to say that when you look at it that way it doesn't  seem like a good deal for any lender!😊
I am tempted  on the interest only remortgages  5 years at £55  a month .

Hippogriff

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« Reply #4 on: April 08, 2021, 07:28:39 AM »
Sure, but your income remains much the same with an Interest Only mortgage... your outgoings (to the Lender) decrease, but not to HMRC (they'd increase slightly).

Simon Pambin

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« Reply #5 on: April 08, 2021, 12:58:28 PM »
Quote from: Jazzert1000 on April 07, 2021, 01:27:48 AM
I am looking to remortgage a flat,this would put it into a loss making property, rent £400 mortgage £545,

It sounds like you're confusing profit with cash flow. The repayment element of the mortgage isn't allowable for tax. (After all, when you borrow, say, £100k from the mortgage lender in the first place, you don't treat that as £100k profit, so why would paying it back be an allowable cost?) The only bit you get tax relief on is the interest (to some extent) and the costs of arranging the mortgage. So, if the interest element of the monthly installments is, say £55, then you're still making £345 profit (before other costs).
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