Mortgage interest on PPR deductable from rental income

nosk · Postby **nosk** » Wed Dec 12, 2007 7:59 am

Is there any way that I can deduct the mortagage interest on the property that I live in from the rental income on another property that I own. The mortgage on the main property that I live in was used solely to purchase that property ie not used in connection with the rental property. If the answer is no to the first question then if I were to remortage the main property (I have some equity in it) and then use the proceeds to repay some of the mortgage on the rental property can I then deduct the interest (on the amount used to repay the existing BTL mortgage) against rentals?
Many thanks for any advice!

al_eebee · Postby **al_eebee** » Wed Dec 12, 2007 8:47 am

How much is the mortgage on the rental property and what was its value when the rental business commenced (or on purchase if they are one & the same)?

If the let property value when first let was Â£50k and the mortgage Â£30k then you could remortgage to obtain relief for the difference of Â£20k.

If rental property mortgage = value when first let then you will not be able to obtain any further relief by a refinance

nosk · Postby **nosk** » Wed Dec 12, 2007 9:40 am

Thanks. There is headroom in the BTL to obtain additional tax relief by increasing the mortgage on the BTL up to the MV when first let but what I wondered is can I reduce the (expensive) BTL mortgage by increasing the (cheaper) mortgage on my main residence and still obtain the same tax relief? Alternatively can I deduct interest incurred on my residential mortgage (in which I live) against the rentals given that the BTL mortgage is less than the MV when first let (and currently after deducting the interest on the BTL mtge I am still left with an income tax bill on rentals)?

King_Maker · Postby **King_Maker** » Thu Dec 13, 2007 12:53 am

Yes, you can obtain tax relief on a loan which is (effectively) a replacement for the BTL loan - but only for the relevant amount.

As al_eebee says,the maximum amount of the loan would be limited to its purchase price or market value at the time the property was introduced into the Letting business.

An example (Example 2) is given in the Inland Revenue's Business Income Manual at section 45700 :

http://www.hmrc.gov.uk/manuals/bimmanual/BIM45700.htm