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
10:18 AM, 18th May 2015, About 11 years ago
Reply to the comment left by “John Bailey” at “18/05/2015 – 10:05“:
Hi John
Please see my first comment, which answers your question ….
“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.”
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Member Since May 2015 - Comments: 4
10:56 AM, 18th May 2015, About 11 years ago
Hi Mark
So what I think you are saying is that I cannot offset the loan interest, which I calculate at £130,000 x 5.95% = £7735 per year, above the the original sum of £130,000. So I can offset for approx 17 yearly tax returns?
Member Since January 2011 - Comments: 12196 - Articles: 1396
11:29 AM, 18th May 2015, About 11 years ago
Reply to the comment left by “John Bailey” at “18/05/2015 – 10:56“:
Hi John
No not really, I think some of your thinking is wrong in your original post but other parts are right.
I don’t want to get into too much detail here because I’m not qualified to give you tax advice. However, I do think you can offset the interest and fees that you have been paying since you first let the property, but only in proportion to what you used as deposits to fund the BTL properties and only in proportion to the interest rates you have actually been paying. There could be further complications though if you have since refinanced the BTL properties but that would depend on how you utilised any net surplus refinance proceeds.
What you really need is for a professional accountant, experienced in landlord taxation, to produce profit & loss accounts and balance sheets for you. Without those it is impossible to say whether you have been under or over stating your income.
Please see >>> https://www.property118.com/landlords-tax-returns-10-common-mistakes/61630/
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