Income tax & mortgage interest

[Solent]

There is probably a straight forward explaination to this query, but I can't think what it might be.

I own a buy to let property and have read in buy to let guides, and also been advised, that it can be advantageous to pay more interest on the mortgage in an effort to reduce your income. One guide appears to regard income as detrimental to a buy to let business and uses the following example:

'if the rent is, say, £10,000, the interest is £7,000 and other costs are £2,000, then taxable income would be £1,000, i.e. £10,000 less (£7,000 + £2,000).
However, supposing you had paid off half the mortgage loan, then the interest would also fall by half from £7,000 to £3,500. If the rent is still £10,000 and other costs still £2,000, then taxable income would go up to £4,500 i.e. £10,000 less (£3,500 + £2,000). With higher income there would be more income tax to pay!
So by keeping a lot of money borrowed, your interest cost can stay high and your taxable income will stay low'

I understand that interest payments are deductable against income tax, but I don't follow the logic in this example. Surely it would be better to be earning £4,500 paying say 20% tax on it and taking home £3,600 than earning £1,000 paying 20% tax and only taking home £800.

I understand that it may be advantageous to increase your borrowing if you are using that borrowed money to generate a decent return elsewhere, but to simply assert that income is bad and higher interest payments is good seems extremely strange.

[pawncob]

This is the tail wagging the dog. It's better to have income and pay taxes than to make a loss.

[Peter D]

"that it can be advantageous to pay more interest on the mortgage in an effort to reduce your income" do you mean to borrow more against the property. Paying more interest but on the same value of mortgage does not work as the excess interest, if accepted, is placed in a seperate fund and rolled over till the end of the mortgage period so it is not interest and it is not deductible. Regards Peter