Interest charges on loan used for BTL properties
Back in 2005 I remortgaged my residential home and bought 2 BTL properties, the amount remortgaged was £130,000 and the interest rate was 5.95%. Therefore there was an additional annual cost to me of £7,735.
I have since sold my residential house and moved, in fact moved twice since and now have a residential mortgage with a different provider.
I still have the BTL properties and offset the rental income against the mortgage interest, legal and professional costs etc.
I am wondering whether my initial remortgage loan interest charges back in 2005 of £7,735 should also have been used in the offset calculation?
If so, for how long could I have used this amount to offset the BTL income and would I continue to use the rate of 5.95% as it was back in 2005.
For the first 8 years the BTL properties never made any profit, however they are starting to now since moving mortgage providers and achieving better rates, so those profits are being offset against the earlier losses.
Many thanks
John
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Member Since January 2011 - Comments: 12196 - Articles: 1396
1:40 PM, 14th May 2015, About 11 years ago
Hi John
The amount of interest you can offset against rental profits must be proportionate to the amount you borrowed to invest into your BTL properties and the interest rate you are paying.
I strongly recommend you to employ the services of a professional accountant, please see >>> https://www.property118.com/member/?id=452
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Member Since March 2015 - Comments: 2
11:29 PM, 15th May 2015, About 11 years ago
Are you allowed to offset legal & professional fees such as valuation fees against rental income?
Member Since January 2011 - Comments: 12196 - Articles: 1396
5:59 AM, 16th May 2015, About 11 years ago
Reply to the comment left by “Abu Naim Abdullah” at “15/05/2015 – 23:29“:
Yes
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Member Since July 2013 - Comments: 192 - Articles: 1
2:46 PM, 17th May 2015, About 11 years ago
You can only offset your legal expenses in respect of conveyancing against capital gains tax when you sell the property in question and not against your rental income.
You can offset professional fees and valuation fees against your annual rental income however.
Member Since May 2015 - Comments: 4
6:00 PM, 17th May 2015, About 11 years ago
Reply to the comment left by “DC ” at “17/05/2015 – 14:46“:
Hi sorry if I’ve confused, I am not worried about capital gains yet, I remortgage my house in 2005 to Pay deposits on two BTL properties, my question is can I offset the interest on the 130k loaned against the income?
Member Since January 2011 - Comments: 12196 - Articles: 1396
8:13 PM, 17th May 2015, About 11 years ago
Reply to the comment left by “DC ” at “17/05/2015 – 14:46“:
That’s only true in part.
100% of legal fees can be offset against rental profit for remortgages.
In the case of purchases, the legal fees associated with arranging the mortgage and reporting to the mortgage lender can be offset against rental profits but the conveyancing fees in respect of buying the property must, as you say, be capitalised. The trick is to negotiate the most beneficial splitting of the bill for your circumstances with your solicitor, then for him to issue two separate bills 😉
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Member Since July 2013 - Comments: 192 - Articles: 1
8:58 PM, 17th May 2015, About 11 years ago
Reply to the comment left by “John Bailey” at “17/05/2015 – 18:00“:
Hi John
Sorry I should have replied to Abu’s question with my answer but Mark’s response to your question was correct.
Hi Mark
It would be very helpful if you could explain in more detail how any of the conveyancing fees can be offset against income when remortgaging and refer to a watertight reference for everyone’s benefit as HMRC wording on this is very grey and my accountant will not include such costs in my returns and cause me unnecessary costs in the event of an HMRC audit.
Member Since January 2011 - Comments: 12196 - Articles: 1396
9:08 PM, 17th May 2015, About 11 years ago
Reply to the comment left by “DC ” at “17/05/2015 – 20:58“:
I’m not brilliant at referencing legislation but I know for sure that what I’ve stated above is right. If you find the member profile of my accountant (Neil Barlow) and trawl through all of his comments you will see that he has answered this question here before. Sorry but I don’t have time to do that for you at the moment.
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Member Since July 2013 - Comments: 192 - Articles: 1
9:49 PM, 17th May 2015, About 11 years ago
Reply to the comment left by “Mark Alexander” at “17/05/2015 – 21:08“:
Had a quick look and found this under Neil Barlow’s profile dated 13/8/14.
https://www.property118.com/mortgage-arrangement-fees-settable-tax/67765/#comments
Member Since May 2015 - Comments: 4
10:05 AM, 18th May 2015, About 11 years ago
This is all very good, but could someone try and answer my original question please
many thanks
John