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  • Tax

    Shop with flats above

    would anyone know if a building with a ground floor shop and flats above are all treated the same in terms of income tax calculations and returns or would the shop be treated differently?

    thank you.

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    As an owner of what you describe i can confirm the tax treatment is no different to sole residential.

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    They would potentially be treated differently.  If you have a mortgage on the building then the commercial element would not be subject to Section 24.  You have to apportion the mortgage charge between the 2 in a fair way.

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    Welsh landlord. Please could you tell me what’s different. I have a BTL mortgage and my accountant just lumped all of the income from the flats and the shop together. Would I benefit from not doing the shop like this? Thanks

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    Are you aware of Section 24?  In simple terms going forward (being tapered over next couple of years) you will not be able to offset your mortgage interest costs against your income meaning you will pay higher tax.  With commercial properties you are still able to offset mortgage interest.  Does that make sense? Your accountant should know this, if not I can recommend a good one.

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    Hi there. Yes I do know that but didn’t know if the shop element could be done differently as I think my account just took all the separate rental figures I gave him then did all the necessary with deductions etc. The BTL mortgage is on the whole property. So would it make it more favourable for me tax wise if shop element was considered differently/separately to the residential incomes? Thank you.

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    There is no perfect answer and every scenario has it’s pros and cons.  If you can justify that the mortgage is for the commercial property only this would be best.  May need to split title to do this (cost) or if it is a low LTV might be able to say it relates only to the commercial area (need to take advice)

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    Suspect your accountant was working on the 16/17 return?

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA


    Yes a job for the beanies (beancounters)

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