UK Landlord Forum / Life

Hi, would it be possible somebody help with my following query.

I have a buy to let mortgage, and I am trying to get all my information ready for the year end.

When it states interest on mortgage, is this figure the monthly mortgage payment or the interest that gets added on to your mortgage.

And also I have done repairs to my property, but never kept the receipts, can I still put the work down or do you have to have receipts with each expense.

Thanks for you help in advance

There are 2 elements to your mortgage, interest and capital repayment (assuming repayment mortgage) the 2nd element could be classed as 'profit' so if interest is £200 a month, repayment element £100 per month and the rent you recieve £500, you will have a tax liability on £300 per month.

Receipts are needed as they are proof of expenditure.  Otherwise everyone would just type in £10,000 expenses.

With regard to the expenses, if they were paid by bank card or credit card, this may be enough if you can highlight them as being for the property ( one way for example if they were at a DIY store you don't normally use, and that one is near to the property) Although you should have receipts it might be okay to claim a reasonable amount ( by that I mean less than 5% of income) but it could well be challenged, but unlikely.

Oh, and hurry up, only 2 days left to file!

Thanks for the thanks. 

Thank you so much for all your help

Hi riptide, sorry I am not clear on the mortgage bit, my mortgage is a repayment and my repayment is more that the interest charged. But I was told is I can only put down the interest. For example my payment is 271.00 month, but my interest is 134.00 per month, so what you are saying you can add these together and then minus the rent. Or I am misunderstanding, as I was told I could only put down the interest at 134.00.

I am not an accountant - you should always get professional advice.

There are two different types of tax relating to buying property to let.
There is revenue / income based taxation and capital gains taxation.

When you receive income from rent, this is income and you pay income tax on it.
When you incur expenses that are solely related to maintaining your rental property (fixing a boiler or cleaning it to prepare for a new tenant)
or arise as a consequence of it (driving to the property in your car, the lights in the home office while you do the paperwork) you can offset them against the income.
Interest on a mortgage is an expense.

When you sell a property, any increase in value is taxed as capital gains tax (unless you can prove that the property is actually your main residence - get some advice).
Any costs associate with improving the property (actual building work, solicitors fees) are included with the cost of buying the property when calculating the profit.
Any capital repayment of the mortgage is simply spreading some of the purchase cost over time.
So this is accounted for when you calculate the capital gain.

Everyone's tax situation is different, but you usually end up paying roughly the same amount of tax anyway (i.e. too much).
Just at different times - income tax is due every few months, capital gains tax only when you sell a property for more than you bought it for.

Hi jpkeates, thanks for ur reply, I did speak with an accountant, and he did say you can only put down the interest only, but riptide kindly replied to my post, so I am a bit confused as to what to put down, I did explain to the accountant, that my payments are more expensive than my interest, so I am going to be advising the tax office I am earning more in profit than I will be. As in my last quarter est mortgage is 1000, I interest 500.00, I just want to do the right expenses, so I don't have much come back,as we do not make hardly anything in the property, once I take the mortgage payments off, but the way the tax want me to pull my expenses together I will be making more money that I am, which this is not the case. I didn't buy this property to let, it just the way it is at present, so I am not out to make the money but just to keep my head above water.

You can only claim the interest on the mortgage against the income for tax purposes.
You'll get the benefit of any capital you've paid back when you sell the property, you can't offset it against income.

You can claim for any expenses associated with the repairs that you did - not your time, but materials and other costs.
This includes any mileage in a car to go to and from the property.

The receipts issue is a problem - you can try and claim without them, but accountants don't like it.
If you redecorated, you could reasonably claim for the paint that you must have used for example.
You can be required to prove any expenses, so try and find credit card statements, bank statements for any cheques or debit card payments.
If you're certain the purchases were solely for the renovation of the property, you're simply being honest and are unlikely to have a problem.
It's not as if you're trying to claim back VAT - when the receipts would be much more important.

You have to sign the tax return, so you're responsible for it and what it says
It's up to you.

My view is that if your accountant isn't working hard to reduce the tax you pay to a minimum, go somewhere else or do the return yourself.

Also, I am not an accountant or an expert in tax - you should always take professional advice over posts from a bloke on the internet!

Mortgage £100,000

Repaid over 20 years is £5,000 a year.

This is the first part of your monthly payment.

Interest to pay on the balance owed, at 4% it would be £4000 a year. This is the only bit you can claim against Rent.

Some silly people have interest only MOrtgages, and it wouldn't be right if you could actually claim your savings scheme ( think of the repayment part as the tenant buying your house for you) against your tax bill as well.

Clear?

Hi boboff, thanks I think it's clear, the reason why I cannot use the mortgage payment is because as you stated the tennent is really paying for it, that's is why the government only use the interest, otherwise the government will be paying for the house. Sorry I just couldn't get my head around not putting my correct outgoings. Thanks everybody for you help

Quote from: boboff on February 01, 2014, 01:27:10 PM
Some silly people have interest only MOrtgages,

I quite liked you but you've called me silly now 

Quote from: WOODYPEG on February 01, 2014, 11:11:34 AMI did speak with an accountant, and he did say you can only put down the interest only

Your lender may well be able to produce a simple interest statement for you. Obviously you will also get an annual mortgage statement that should show how much you have paid in interest for that year. For a special statement, the lender may well charge you - if they can provide this for you and they do charge you, I expect it would be a nominal fee. I also expect you can then claim that against tax as well.