This is hypothetical but a situation that I might find myself in in the foreseeable future and I'd like to structure things now so that I don't inadvertently pay more tax than I need to in the future.
Assume two properties, one is let and the other is a home.
Assume that the let property has no mortgage but the home does.
Assume that the value of the mortgage is less than that of the let property at the time it was first let.
1. Is it possible to take out a buy to let mortgage on the let property, pay off the mortgage on the home, and then claim tax relief on the interest payments or does the mortgage need to be taken out before the property is let?
2. Assuming 1 is allowed, is it possible to account for the mortgage on the main home as an expense of the buy to let property (i.e. don't actually move the mortgage)?
3. What documentation would be necessary to show that the mortgage on the buy to let (or the interest on the mortgage on the main home if you can claim that) doesn't exceed the value at the time it was first let?
I'm in the taper band where pension annual allowance reduces with income. Will the mortgage interest expense restore this? I know that the tax relief is being limited to 20% over the next few years but if I pay 1000 in interest will I get 200 tax relief plus 500 extra pension allowance?
Are there any other things I should be thinking about given that my effective tax rate is 67.5% and I don't need the income from the property in order to pay the mortgage? (I think I would get clobbered in stamp duty if I moved the rental property into a company but perhaps that would only be a short term pain for a long term gain?)
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