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Mortgage - Tax


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I hope somebody can give me some advise.

I currently rent out my Uk home via a letting agent. I am living abroad.

My monthly mortgage is 100% endowment and is a around 375 sterling a month, my monthly amount i receive from the letting agency is 725 sterling.

My question is, is this the best way to do it. Clearly i am able to change the mix of my mortgage to a repayment/ endowment split so i pay the mortgage off quicker and go up to 725 sterling or is it better to carry on doing what i am doing

The rental property for me is an investment secuirity if i have to move back to the Uk rather than a money spinner for me

I understand i can claim tax back with my current setup but am not clear how this works & the best way forward

Comments would be very much appreciated

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Hi Simon

Firstly, I assume that your letting agent is currently deducting tax or has applied for you to receive the rental income gross of tax? If not, then this should be reviewed.

The way that tax relief on a mortgage works is that you claim mortgage interest relief as a deduction against your rental profits. So for example, if you receive rental income of £725, and have a mortgage repayment of £375, of which £175 is interest and the £200 is with reference to the endowment, then you can only claim a deduction for the mortgage interest element.

It may be possible to look at restructuring the borrowings you have overall (including cradit cards. loans ... anything!) with a view to maximising the interest relief you can claim, depending on your circumstances. Should you required a one-off review tailored to you personally, I can offer a competative quote. If this is of interest to you and you would like further information, please do email me on sherena.glanton@horwath.co.uk I have already helped other Residential Landlord Website users in this respect - enabling them to maximise benefits and reduce tax liabilities.

There are of course other expenses claimable, not least the agents monthly deduction!

I hope the above information helps, should you require more specific advice, please do contact me.

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