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  • Buy-to-Let

    Re-mortgaging in the context of tax and S24?

    Hi all

    I am trying to understand what my tax liability is when I have remortgaged a BTL where the new mortgage exceeds the original price. I have read some stuff online but I'm not sure if I fully 100% understand it, so looking to see if someone on here can break it down in a simple way.

    So my situation...

    • In 2011 I purchased a property for £175k with a mortgage of £130k (£45k deposit).
    • In 2017, The house was worth £320k, so I took out a further advance of £80K. The total mortgage is now £210k.

    As you can see, the mortgage is now £35k more than the original purchase price.

    The funds were used towards purchasing a residential property, so not used to invest back into my BTL's.

    This is where I am stuck, can someone please advise what this means in terms of what I am allowed to claim against my rental profits? I have read that the mortgage interest is only tax deductible up to the value of the original house price, but how is this calculated?

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    Yes you can claim £175k/£210k of the interest so 83.3%. Subject to the new restrictions of course.


    Debbie

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    Afternoon Debbie

    how would this work for someone who has bought their house in the 90s? My parents bought theirs for 58k with 35k mortgage in 94 and spent 60k on refurb and extensions

    it was paid off in 2006 and is now worth 430

    they want to use 75k for an extension with the rest on a BTL, will they get full tax relief on 150k?

    many thanks


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    Did they live in the house before letting?

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    Will the tax liabilities be any different if the capital raised through remortgage is invested further into BTL or resedential ?

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    Yes you compare the total borrowing to the total original cost across the whole portfolio.

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    Yes Debbie it was their residence before they moved in with me, the remainder of the portfolio is 40-50 LTV so they can claim tax relief up to this amount?

    many thanks once again

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    When looking at the cap for the interest it would be the value when first let rather than original cost.

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA