Mixed Use Property Mortgage Interest Tax Relief?

by Readers Question

11:56 AM, 2nd December 2016
About 2 years ago

Mixed Use Property Mortgage Interest Tax Relief?

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Mixed Use Property Mortgage Interest Tax Relief?

I’m looking at venturing into the mixed use property market (e.g. shop on ground floor, residential above). Two reasons: No need to pay SDLT if it’s under £150k, even though I own multiple properties. Diversifying my portfolio so all my eggs aren’t in the residential sector.mixed

The property I’m looking at is freehold and is currently leased out as a whole to one person. I believe I will need a commercial mortgage to raise the finance as it’s mixed use? It won’t be held in a Ltd company.

Will I be able to claim mortgage interest tax relief on this as it’s mixed use and not solely residential?

Thanks for reading and look forward to your feedback.

Mark



Comments

Neil Patterson

11:57 AM, 2nd December 2016
About 2 years ago

Hi Mark,

From .Gov >> https://www.gov.uk/government/news/changes-to-tax-relief-for-residential-landlords

If you take a loan for both residential and commercial properties, you’ll need to use a reasonable apportionment of the interest to work out your finance costs for the residential properties. Only the finance costs for the residential property business are restricted. This also applies if your loan was partly for a self-employed trade and partly for residential property.

Kate Mellor

14:15 PM, 5th December 2016
About 2 years ago

Reply to the comment left by "Neil Patterson" at "02/12/2016 - 11:57":

Neil, my reading of this is that if you have a single loan covering a mix of commercial & residential properties you must apportion the interest charges. A semi-commercial property on a single title is a single mixed-use property and does not come under the new tax rules. I was advised of this by my accountant when we took out our semi-commercial loan and I've found several explicit references to it on the internet. One was in a finance article in the Telegraph. See quote :-

Individual landlords who buy mixed-use properties can continue to claim mortgage interest relief after the new regime is introduced, making these investments an even more attractive prospect in future, said Mr Whittaker.

“You will still be able to offset your interest even in 2020 [when the new tax regime takes full effect]. At the moment you pay a little bit more on the mortgage, but banks are already indicating that their rates on mixed-use property will come down," he said.

I hope I haven't been incorrectly advised on this...

chrisbusy

9:00 AM, 10th December 2016
About 2 years ago

Be interested to hear further comments on this as i am considering this direction myself and guidance has been unclear !


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