hein25 Posted July 29, 2007 Report Share Posted July 29, 2007 hi, i have no morgage on my buy to let property but wish to release cash to improve my own home ,does anyone know if the interest on the loan is tax deductable and is there any legal paperwork that needs to be done for it to be tax deductable? or can i just include the interest on the loan in the tax calculations? and where to go for a buy to let morgage? any help appreciated.hein25. Link to comment Share on other sites More sharing options...
Melboy Posted July 29, 2007 Report Share Posted July 29, 2007 You cannot raise mortgage money from your BTL/rented property and claim tax relief on mortgage interest if the money is going to be used for other purposes....in you case Home Improvements. Nice try though! Mel. Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted July 29, 2007 Report Share Posted July 29, 2007 Wouldn't that be nice ! Simon Link to comment Share on other sites More sharing options...
Matthew Posted July 29, 2007 Report Share Posted July 29, 2007 I'm not convinced about that. If the property was bought for say 100K, then you should be able to allocate interest on any borrowings up to the 100K. The way I read one of Plyms posts was that in theory the money she spent on the purchase of the property could have been spent on anything else, so if you have a mortgage on your own property or other items, you can offset the interest up to 100K. Since you could have reduced your own mortgage and bought the place with a mortgage. There are ways of doing it I'm sure, Plym? Link to comment Share on other sites More sharing options...
hein25 Posted July 29, 2007 Author Report Share Posted July 29, 2007 You cannot raise mortgage money from your BTL/rented property and claim tax relief on mortgage interest if the money is going to be used for other purposes....in you case Home Improvements. Nice try though! Mel. yes it would be nice,perhaps i will have to sell it ,i should have bought it with a morgage, so not all cash gone to the property .thanks for advise. Link to comment Share on other sites More sharing options...
odecar Posted July 29, 2007 Report Share Posted July 29, 2007 Mortgage the property and use the money to put down deposits on other property and build up the business. Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted July 29, 2007 Report Share Posted July 29, 2007 I think as Matt pointed out earlier you should be able to mortgage upto the "cash" you put into it - b4 improvements and repairs and ALSO before you let it ................? Plym our resident tax expert will i'm sure clear this one uo for us shortly ! Simon Link to comment Share on other sites More sharing options...
Trenners Posted July 30, 2007 Report Share Posted July 30, 2007 Hi all, If the property was purchased for £100K cash, for example, then the landlord injected £100K capital into his buy-to-let business which means that the property can be re-mortgaged in the future (upto £100K) and the interest payments can be offset against the rental income. The confusion, from other posts, arises because you cannot re-mortgage to extract equity growth from the buy-to-let business and off-set interest payments arising from the equity growth against the rent. In other words, you can't take out more than you initially put in and claim tax relief on it ! Hope that helps. Mark Link to comment Share on other sites More sharing options...
hein25 Posted July 30, 2007 Author Report Share Posted July 30, 2007 Hi all, If the property was purchased for £100K cash, for example, then the landlord injected £100K capital into his buy-to-let business which means that the property can be re-mortgaged in the future (upto £100K) and the interest payments can be offset against the rental income. The confusion, from other posts, arises because you cannot re-mortgage to extract equity growth from the buy-to-let business and off-set interest payments arising from the equity growth against the rent. In other words, you can't take out more than you initially put in and claim tax relief on it ! Hope that helps. Mark Hi Trenners, thanks for your advise,some hope then,I am looking to take out less cash than I put in ,just need to know the tax situation to keep within the law.(small time landlord) not like some big shots like Rodent! Hein25. Link to comment Share on other sites More sharing options...
plym77 Posted July 31, 2007 Report Share Posted July 31, 2007 Apologies for the delay - I hadnt realised that this was a tax-based query! To clarify for all, you can mortgage the buy to let property and claim tax relief on the interest up to the value of the property at introduction to the letting business. So if that was at purchase, it is your purchase price, but if it was previously your PPR, then it is the value at the date the property was introduced to the letting business. The loan secured on the BTL can be used for any purpose, whether home improvements or buying a sports car even! The reason is that you can extract money from the capital introcudes (ie. the BTL property) Interest Relief can be claimed on the propertion of the loan up to the value at intro I will clarify by an example. You buy a house in 1990 as your PPR for £100k, you introduce it as a BTL in 2000 and it is worth £200k. In 2007 it is worth £250k. You can mortgage the property and claim interest relief on a loan up to £200k. If you take a mortgage for say £220k, then you can claim mortgage interest relief on the £200k up to the point that the whole loan starts to drop below £200k (for example, if you have a repayment mortgage). The BTL qualifying interest forms the top slice of the loan, and therefore any repayment will pay off the non-qualifying part of the loan first. You may wish to look at my podcast which is on the main page under 'most popular' or under selected suppliers where I cover this topic. I hope this clarifies the position - any queries, please shout! Regards Sherena Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted July 31, 2007 Report Share Posted July 31, 2007 Hi Sharena If that Extra £20 is used as deposit on the next BTL prop then this can be claimed back as a direct cost on the 2nd prop ......... Also if money is borrowed from PPP equity for this purpose this can also be claimed back .... Simon Hein25 Less of the "bigshot" !! I'm just a small furry creature that scurries about at night !! Link to comment Share on other sites More sharing options...
plym77 Posted August 1, 2007 Report Share Posted August 1, 2007 Hi Simon Agreed, the extra £20k's interest could be claimed, if used to purchase another BTL, but not if it is used for personal purposes. However in this case I was under the impression that only one property was purchased and no other purchases were intended. And again, agreed, if money is borrowed on the own home to purchase a BTL or for BTL purposes (major renovation perhaps?) then this element could be claimed for mortgage interest purposes. Sherena Link to comment Share on other sites More sharing options...
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