March 5, 2009
Tax Relief for Landlords - Are you getting yours Sir?
Some residential landlords may not realize that can claim tax relief on new buy-to-let loans, allowing them to save money during trying economic times. Virginia Wallis, a journalist and property expert at The Guardian, recently answered a reader’s question in her column, where the prospective landlord wanted to know if he could claim tax relief on the interest that his buy-to-let loan would incur. Wallis noted that landlords with outstanding buy-to-let loans can, in fact claim tax relief on interest-related expenses.
Additionally, it is also possible to claim this same tax relief if a mortgage is used to purchase a second home, and is secured on an older property–that was purchased for cash and is not weighed down by any loans and mortgages—which is in turn rented out by the owner. For example, the reader who wrote to Wallis noted that he wanted to move out of his current home, turn that into a rental business, and then take up a mortgage in order to purchase a new house, which would serve as his permanent residence. The reader would be allowed to use the equity in his first property to purchase a second home with a mortgage, and then claim tax relief on any associated interest.
UK tax rules stipulate that buy-to-let mortgage holders may claim tax relief on the amount of the entire loan, provided that it does not exceed the total value of the home. However, if the landlord decides to borrow money in excess of the residential property’s value, he/she would not be eligible to claim any additional tax relief on this portion.
