Me and my wife bought a second home in July with the intention of renting out our previous home. As such we entered into a buy to let arrangement with our mortgage provider, and then purchased the second home. We have been paying payments on an interest only mortgage since this time with a stipulation that we cannot live in the home as it is a buy to let product.
We were then delayed in fixing the house up etc and have subsequently decided to sell the home. We will of course get the additional stamp duty back as we are well within the 3 year timeline, but my query is around the interest payments of the mortgage.
I am comfortable that we will be able to take a tax deduction for the interest payments we have been making monthly, however the mortgage provider is entitled to charge (and will charge!) an exit fee on the mortgage as we had originally fixed for two years but we will be settling before this timeline. My question is obviously whether or not this additional payment is tax deductible, and if it needs to have a specific description to enable it to be considered tax deductible. I.e. if it is described as penalty it might not be deductible, but if it is described as an additional interest payment then it may be?
My thinking is that because it is a buy-to-let product, that all associated fees should be tax deductible, and obviously we have not ended up financially better off so there has been no tax planning in making the decisions we have made, so unless someone gives me a clear indication that I can't claim, I would treat it as a mortgage payment.
Any advice would be appreciated.
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