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Where Taxpayers and Advisers Meet

BTL re-mortgage loan/savings calculation for IR..

Joined:Wed Aug 06, 2008 3:13 pm

Postby Graham1 » Sat Jan 22, 2005 8:19 am

I would appreciate your kind guidance..

I am in the process of buying a property (to BTL) off-plan with completion expected 2006,

I made the first ‘stage-payment’ of 10% on exchange and need to make a second 10% ‘stage-payment’ this June.

I have other BTLÂ’s and have re-mortgaged one to make the stage payments. I am aware of IR rules regarding assigning interest cost to new property, not property re-mortgaged.

As I am self-employed my income is erratic, I thought it prudent to re-mortgage now and deposit funds for second stage-payment in savings account until needed in June. For IR, my accounts (with audit trail) will be calculated as follows for the period; start of loan until June):

Thus; re-mortgage loan interest (7%) charged for period, minus interest received from money invested (Net 4.28) for same period.

Thank you


Huw Williams
Joined:Wed Aug 06, 2008 2:18 pm

Postby Huw Williams » Sat Jan 22, 2005 10:44 am

I am not sure what the question is.

As the money was borrowed to acquire the property, I do not think there is a problem with claiming relief for the interest cost in your rental accounts.

The deposit interest does not feature in your rental accounts - it will go on the savings and investment income page of the return.

Or is there some other issue you are not sure about?

Huw Williams

0115 914 6846

Joined:Wed Aug 06, 2008 3:13 pm

Postby Graham1 » Sat Jan 22, 2005 1:06 pm

Thanks Huw.. my concern is that I for a period of about six months I have the benefit of money that I cannot invest in BTL property, I am claiming the cost of this interest (in this case 7%)and to offset this outgoing have put this money into a savings account giving Net 4.28% interest.

On next years tax return I plan to claim the 7% and show the Net interest as income from savings - in an effort to keep IR happy?

Appreciate your further comments.

Thank you.

Joined:Wed Aug 06, 2008 3:15 pm

Postby Instinctive » Sat Jan 22, 2005 1:41 pm

Graham, I think you want to claim the interest charge until June 2005 in your self-employment accounts as an expense. This is definitely not allowable as the money has not been used for your business.

I have not researched whether this interest is allowable expense of your lettings business. Wowever, I have a recollection that you are allowed to claim the loan interest in your 'overall rental business' provided that the money is used for the intended purpose within a certain period, I believe a year.


Huw Williams
Joined:Wed Aug 06, 2008 2:18 pm

Postby Huw Williams » Mon Jan 24, 2005 1:15 am

Aa Ramnik says, you do not have to use the money borrowed immediately.

What is important is that you do use the money as intended.

By all means put a note on the tax return to explain the unusually high interest income, so that the Revenue cannot come back in 6 years time and reopen the issue.

Huw Williams

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