Can I offset interest from my re-mortgage?

I have a buy-to-let property which I bought about 5 years ago for £130,000 cash. My wife and I have just had twins so we are looking to extend our house to accommodate our growing family. If I mortgage the buy-to-let property, am I able to offset the interest charge against the rental income? I’d be looking to raise about £40,000.

1st April 2011

Generally speaking, it is not possible to offset the interest on a loan if the loan monies were not used for the purpose of the letting business.

However, there is a concession in HMRC’s Business Income Manual in paragraph 45700. This gives landlords the opportunity to release equity from their portfolio and offset the interest regardless of what the money was used for.

The only restriction is that the amount of the equity release cannot exceed the original market value of the property when it was introduced to the lettings business.

Property can be a complicated area of tax, so feel free to seek some professional advice from your local TaxAssist Accountant.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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