Is Life Assurance for Buy-to-Let mortgage debt an allowable expense?

by Readers Question

10:48 AM, 5th April 2015
About 4 years ago

Is Life Assurance for Buy-to-Let mortgage debt an allowable expense?

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Is Life Assurance for Buy-to-Let mortgage debt an allowable expense?

My husband and I have a life-assurance policy to cover our buy-to-let mortgages in the event of the unthinkable. The amount it will pay out each year decreases with the decreasing debt as it is reduced through capital repayment mortgages. We pay monthly premiums for this. Is Life Assurance for Buy-to-Let mortgage debt an allowable expense

Are the premiums we pay for the cover an ‘allowable expense’ to be offset from any rental income?

Common-sense tells me it should be (it doesn’t cover any personal debt).

Anyone know the answer to this?

Many thanks

Louise



Comments

Mark Alexander

10:54 AM, 5th April 2015
About 4 years ago

Hi Louise

The type of policy that you have described is called decreasing term assurance. It is highly unlikely that you will be able to claim the premiums as a legitimate business expense.

However, if you have an earned income there may well be a type of life insurance policy that does attract tax relief. It used to be called pension term assurance but as I retired from financial services quite a while ago now it may well have another name these days. You need to speak to a financial adviser - I recommend this chap >>> http://www.property118.com/member/?id=314

Just in case you are not aware, you should also have the proceeds of the policy written into trust. Doing so ensures that the money goes to the right people at the right time without getting tied up in probate or potentially being subject to inheritance tax levies.
.

R R

21:22 PM, 7th April 2015
About 4 years ago

In a word, no.

money manager

11:25 AM, 11th April 2015
About 4 years ago

RR is quite right, it might help to understand why though as the principle has a carry accross to other "expenses". To be deductible under self-assesment the expense must be "Wholly, neccessarily and exclusively for the purpose of the business" and that's just forst base as differnect categories of expense have to meet other criteria (property letting has it's special rules as well). As the benefit of any policy proceeds would benefit the survivor personally the qualification falls at the first hurdle. If the business was trading as a limited company it could claim such an expense (must) but the policy proceeds would be treated as a trading receipt, not a very desirable result.

As to MArk's suggestion re pension term assurance you are out of luck I am afraid. PTA tax relief was abolished when Labour introduced Stakeholder pensions having got completely the wrong end of the stick.


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