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Where Taxpayers and Advisers Meet

Mortgage cost more that rental income

antonio37
Posts:6
Joined:Mon Jul 25, 2011 8:38 am
Mortgage cost more that rental income

Postby antonio37 » Tue Apr 17, 2018 12:48 pm

Hi

I would appreciate if anyone could help me out.

I am a accidental landlord, I rent out my old house. The rent I receive is £750 a month but the mortgage for the property is £1000 per month.

Is it possible to deduct the extra mortgage cost from the income amount? for example the rental income for the house would be 750 - the extra 250 in mortgage cost = 500 monthly rental income that i would enter on my tax return etc

I am aware that i can currently claim for interest payment etc and the new laws that are being implemented.

Thank you in advance

TaxAdviser2018
Posts:26
Joined:Tue Apr 17, 2018 1:34 pm

Re: Mortgage cost more that rental income

Postby TaxAdviser2018 » Tue Apr 17, 2018 1:51 pm

You can claim tax relief on the part of the mortgage that relates to the interest, not the capital. From 6th April 2017, the amount of mortgage interest that attracts tax relief at your marginal rate of income tax is being restricted to the basic rate (currently 20%). The loan interest restriction is being introduced over a four year period and by the year ended 5th April 2021, any mortgage interest payable in a tax year will be restricted to the basic rate.

Loan interest is being restricted as follows:

Tax Year
2017/2018 - 25% of loan interest.
2018/2019 - 50%.
2019/2020 - 75%.
2020/2021 - 100%.

If you have realised losses from your property income (i.e. where the mortgage interest and other allowable expenditure exceeds the annual rental income), these can only be offset against future rental profits.

SteLacca
Posts:448
Joined:Fri Aug 07, 2015 2:17 pm

Re: Mortgage cost more that rental income

Postby SteLacca » Wed Apr 18, 2018 12:28 pm

To add to the above response, the changes to the way relief for mortgage interest is given can have a significant effect on your tax if you are approaching the basic rate threshold. Because (at the moment, and increasing percentage of) mortgage interest is no longer treated as a deduction from income for tax purposes, this will increase your taxable income and potentially push you into the higher rate band.

e.g. salary of £43,000, rental income of £20,000, expenses £10,000 and mortgage interest £10,000. Previously you would have been a basic rate taxpayer. Now, £2,500 of the mortgage interest is not deducted from income for tax purposes, which effectively means that your taxable income is £43,000 + £2,500 = £45,500, and so £500 is charged to tax at the higher rate.

It's worth bearing this in mind, since even for someone who considers themselves basic rate, it will bring tax into charge which would not have previously been an issue.

antonio37
Posts:6
Joined:Mon Jul 25, 2011 8:38 am

Re: Mortgage cost more that rental income

Postby antonio37 » Wed Apr 18, 2018 9:49 pm

Hi

Thanks for your kind responses, I am still non the wiser! I know about the stuff you mentioned in regards to the new laws and the tapered relief until you can not claim anything back on interest payments.

What I was trying to say is " To pay the mortgage on the rented property I have to put £250 each month out of my own personal money from my work wages" The mortgage for the house is £1000, can this be offset as a loss against the £750 rental the income I receive. in reality I am only getting £500 per month as I am personally down £250 each moth!

Monthly Mortgage: £1000

Rent: £750

Personal money to cover monthly mortgage: £250 I am wondering if this amount can be offset against the monthly rental income. So instead of declaring a rent of £750 I should only declare £500?

I hope I have made things clearer this time!

Thanks again for your fast response.

Cheers

Rosanna
Posts:2
Joined:Wed Apr 18, 2018 7:32 pm

Re: Mortgage cost more that rental income

Postby Rosanna » Wed Apr 18, 2018 10:32 pm

How much is the mortgage INTEREST of your £1000 mortgage?

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Mortgage cost more that rental income

Postby bd6759 » Wed Apr 18, 2018 11:47 pm

No. You cannot set your property loss against your general income.

antonio37
Posts:6
Joined:Mon Jul 25, 2011 8:38 am

Re: Mortgage cost more that rental income

Postby antonio37 » Fri Apr 20, 2018 12:32 am

Re: Mortgage cost more that rental income
Although this is not the answer I was hoping for, I think we are on the same lines now.

Thanks for all your advice


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