Interest relief on mortgage

I may get an equity release on my house in order to purchase a flat to rent out. Would I be able to claim tax relief on the interest portion of any rent charged? It's not a 'buy-to-let' mortgage, or connected to the flat, but I would release the equity exclusively for the purchase of a flat.

Hi,
As your question is specific to your personal circumstances you will need to contact our Self Assessment team to explain your situation in full as some clarification would be needed to provide you with an answer.
Self Assessment: general enquiries
The following guidance advises in addition to these restrictions, the normal property business rules apply:
PIM2052 - Deductions: interest: overview
See the guidance below, including the “wholly and exclusively” rule and the rules governing the timing of relief.
PIM1900 - Deductions
PIM1100 - Use of trading income rules
A customer cannot, for example, deduct interest on a private loan, such as a loan used to buy their private residence. Where part of the customer’s own residence is let see the guidance here:
PIM2100 - Deductions: main types of expense: expenses for own home
Similarly, the interest on a loan or overdraft may not be allowable, or only part may be allowable, where the customer, for example, uses the borrowing:

• to buy non-property business investments (which may be shown in the balance sheet as assets),
• to buy private assets or assets for their family,
• for the provision of private funds to be taken out from the property business.

Thank you.
 

Not HMRC...if the purpose of the borrowing is to buy a property to rent out then that element is allowable. It doesnt matter the mortgage type nor where secured, it is the purpose of the borrowing. This is NOT a deduction against rental profit, you would claim the morgtage interest paid as finance costs separately and then you will receive 20% releif as a tax credit against the let property tax liability.

Hi I thought relief for finance cost was a maximum of £1000. However, reading the other posts it appears to be a flat rate of 20% of finance cost. For 2021-2022 and 2022-2023, I claimed a max of £1000 pa even though the mortgage interest on my buy-to-let property was £6528.61 and £6227.98 respectively. Would appreciate your advice on the correct computation and how I can claim on the error from previous years if so. Thank you.

Hi please can you help i understand that you can claim 20% tax relief from your buy to let mortgage, but not sure what coloum to put that in. in this case the the payments was £5243 , so where do i claim £1049 back

Please see the guidance at: Work out your rental income when you let property - GOV.UK

Kalpana...Mortgage interest has no upper limit, if the purpose of the borrowing was allowable (buying/improving rented property etc)...its always a claim to full amount (or allowable amount) of the loan(s), which the calculation will then relieve at 20% up to the amount of the liability on the property only. You appear to have confused the £1000 annual property allowance, which is only claimed when expenses and mortgage interest are not claimed, i.e. you cant claim £1000 allowance AND expenses/interest. These figures were tapered on the change to 20% through 2020, from then interest releif has been 20%. You need to amend your returns.

Hi Phil wheeler
Unfortunately HMRC is unable to provide specific or tailored advice through the Online Community Forums and cannot comment on any form of calculation, example or scenario as we may not be in possession of all the relevant information.

The HMRC Customer Forum is for general queries only and is intended to help our customers self-serve. We are unable to provide financial advice or further interpretation of the guidance provided on GOV.UK:

Work out your rental income when you let property - GOV.UK
Examples of how to work out Income Tax when you rent out a property - GOV.UK
Tax relief for residential landlords: how it's worked out - GOV.UK

Customers with more complex enquiries often engage the services of a professional advisor or accountant and this may be something you wish to consider.