Tax relief on a B2L mortgage

[vivien24]

We are considering buying our 5th B2L but this is the first where we need a mortgage.

If I get an interest only mortgage can I claim the monthly payments from my whole tax liability (ie total income) or can I only set this expense against the income of the one particular house it refers to?

[Richlist]

If I get an interest only mortgage can I claim the monthly payments from my whole tax liability (ie total income) or can I only set this expense against the income of the one particular house it refers to?

I don't really understand why it makes a difference or why you are asking the question.

When you currently complete your Self Assessment Tax Returns you presumably fill in the Land & Property pages, including in that return the combined income & expenditure for X4 properties ? When you buy another property you will do exactly the same for X5 properties.

The mortgage on which you pay interest cannot be greater than the initial cost of the property.

Can you give more detail behind your question please ?

[Guest caravanj]

We are considering buying our 5th B2L but this is the first where we need a mortgage.

If I get an interest only mortgage can I claim the monthly payments from my whole tax liability (ie total income) or can I only set this expense against the income of the one particular house it refers to?

Your rental properties are a business so you add up all your income & deduct all your allowable expenditure from all 6 properties as a whole when you come to complete your tax return.

You'll need to keep your own income & expenditure records for each in individual property in case you are challenged by HMRC to prove your tax return figures.

[vivien24]

Sorry if I havent made myself clear.

As I say, we have 4 rental properties at the moment, all mortgage free. We are considering buying a 5th, for which we will need a mortgage. (of approx 60% of the value)

If, for example my repayments are £500 per month (interest only), can I set that monthly repayment as an expense against the whole gross profit of all my properties, or just against the rental profit of the one house the mortgage relates to.

[vivien24]

Your rental properties are a business so you add up all your income & deduct all your allowable expenditure from all 6 properties as a whole when you come to complete your tax return.

You'll need to keep your own income & expenditure records for each in individual property in case you are challenged by HMRC to prove your tax return figures.

Thank you, think you have answered my question

[anita.z]

According to the Government's website:

If your total income from UK property in the 2010-11 tax year is under £70,000 a year you can group the expenses as a single total on the Self Assessment tax return. If it's £70,000 or more, you'll need to show your expenses separately.

[Guest caravanj]

According to the Government's website:

If your total income from UK property in the 2010-11 tax year is under £70,000 a year you can group the expenses as a single total on the Self Assessment tax return. If it's £70,000 or more, you'll need to show your expenses separately.

This will just confuse the issue so I'll explain it more fully.

HMRC rules do not mean you have to enter separate expenditure amounts for each property on your self assessment form, the £70,000 threshold means you have to enter the combined expenditure for all properties in the categories listed on your self assessment form.

For a combined rental income from all properties of less than £70,000 you can just lump all your combined expenditure together & enter it in the box headed 'Other allowable property expenses'.

In short for a total rental income of under £70,000 you don't have to show how the expenditure originated but for a rental income over £70,000 you do i.e. interest, repairs etc. but no matter whether your rental income is under or over £70,000 you always use COMBINED figures.