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Andrew Baker(baktax)
Andrew Baker(baktax), Personal Tax Adviser
Category: UK Tax
Satisfied Customers: 756
Experience:  35+ years experience in income tax, CGT, non-residence
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I am filing tax return for buy to let property, jointly owned. I

Resolved Question:

I am filing tax return for buy to let property, jointly owned.
I borrowed £40k from exsisting sole residential mortgage (current home) in my name to pay as deposit towards BTL Purchase. This was additional loan secured on our current residential home.

I understand in addition to claiming interest relief on BTL Mortgage, I can also claim the interest part of 40k loan used to pay as deposit.

I have a statement from bank showing amount of interest paid for the tax period.

I also understand we have to complete separate tax return and show half of everthing i.e. profit and expenses.

My Question is: How do we both show the on our teax rerturn the interest amount from £40k additional loan - i.e. can we split this into half show it remembring the loan was paid into my bank acoc**t which then went to solicitor to pay as deposit.

Or it is only me who can show on my tax return ?

Please advice as I am a bit confused.

Many thanks
Submitted: 3 years ago.
Category: UK Tax
Expert:  Andrew Baker(baktax) replied 3 years ago.

XXXXX XXXXX (baktax) :

Hi

Customer :

Hi Andrew

XXXXX XXXXX (baktax) :

If the loan for the deposit has been taken out in your name only, secured on a property which is owned in your sole name only you can claim the interest against your half share of the rental income.

Customer :

Ok, so just to recap the first part, can I actually (from eyes of HMRC Inspector's rule book), claim the interst part on the additional loan of £40k I got from my residential house me and my family live in. My current residential mortgage having been increased from £30k to £70k ie paying one mortgage payment.

XXXXX XXXXX (baktax) :

Yes because the purpose of the additional loan was for the purchase of the buy to let property

Customer :

Ok, great, I wanted to verify this from earlier advice received elsewhere. Now the second part, again to just confirm - Can I only show the 100% interest amount I paid (from start of BTL in Nov 09 to end of March 2009, around £1200 as interest part of repayment mortgage - on my return meaning my wife who is jointly owning the BTL property cannot show half of the same interest on additional loan, beacuse the £40 was paid to me as I am the sole owner of residential property.

Customer :

Just to conclude this, can my partner, on her own tax return, show the 50% profits/ loss etc,can she include the BTL Mortgage Interest relief, but she can not add to this her half of £40k interest paid towards BTL Mort because I have already included 100% of interest relief on my return. Finally, to put my mind at rest, please can you cofirm if you are registered charted account, if not your account status. Thanks

Customer :

Sorry for repeated long question, just need to put my mind at rest - your reply is very much apprechated.

XXXXX XXXXX (baktax) :

sorry for the delay

XXXXX XXXXX (baktax) :

please bear with me

Customer :

ok, no problem.

XXXXX XXXXX (baktax) :

Hi sorry about that - telephone call !

Customer :

Just to recap/ summarise: you confirm I only show 100% the interest part of £40k ie. £1200 from start of BTL in Oct 09 to end of March 2010 on my return - my wife cannot show half of £40k interest on her tax return beacuse residential property on which I got this loan was in my sole name. So can I then show this on my return as the 100% ie £1200

XXXXX XXXXX (baktax) :

Yes to confirm your wife will not be able to claim half the interest on the loan you took out as a deposit for the BTL property as the loan is in your sole name secured on a property owned solely by yourself. Therefore you claim 100% of the loan interest on this loan against your half share of the rental income, on your tax return.

Customer :

And dont forget to confirm (sorry) if your are registered chartered account or tax specialist so I can be confident when filling our reuturns based on info I have supplied - first time completing returns fo rboth of us.

XXXXX XXXXX (baktax) :

You can claim the whole of the loan interest from the date the loan commenced as the purpose was to purchase the BTL property even if the letting started at a later date.

XXXXX XXXXX (baktax) :

I am not a chartered acountant but a tax consultant. I have been working in taxation since 1976 - 10 years Inland Revenue, and for various firms of chartered accountants and tax consultants since then. I also have my own tax consultancy business and have had many clients for whom I have prepared letting accounts and tax returns.

Customer :

Can I assume we can include usual BTL Morgage Interest relief in addition to me showing the 100% interest on my additional loan, on our return. rWishing you a peaceful, joyful and happy Xmas and a Happy New Year. Thanks for the fantastic advice and time.

XXXXX XXXXX (baktax) :

Yes the BTL mortgage interest can be claimed 50:50 each as the mortgage is in joint names with your wife

XXXXX XXXXX (baktax) :

Merry Xmas to you both too

Customer :

Ok, a big thank you and once again Have a good Xmas break (hope you have it even though you may still be helping others online). Kind Regard.

XXXXX XXXXX (baktax) :

Thank you and take care

XXXXX XXXXX (baktax) :

Kind regards

XXXXX XXXXX (baktax) :

Andrew

Customer :

Very sorry, forgot to ask a question about repair cost on BTL - ok if you cannot answer, but fantastic if you can...Soon after buying BTL property we replaced worn out carpets with laminated flooring in the house at cost of £1500 - did this before first tenants moved in - question is can I (once again legally from HMRC point of view), put this on our return as repairs etc ? I am claiming 10% wear and Tear allowance as well as its furnished proeprty. Many, many thanks.

Customer :

Some rooms did not have any carpets, just hard tiled concrete floor, i think.

XXXXX XXXXX (baktax) :

Unfortunately, you can't claim both. The 10% W&T allowance includes floor coverings. You have to decide from the outset whether you claim the 10% W&T allowance or replacement (not initial purchase) furnishings - you can't swap the basis from year to year so you have to adhere to the same basis throughout. In the long term the 10% W&T is usually more beneficial.

Customer :

OK, can I possibly include the cost replacement laminate flooring as capital expedniture ie when I sell BTL House I can show when working out sale profit?

XXXXX XXXXX (baktax) :

I would say that laminate floor covering is treated in the same way as carpet.

Customer :

Ok, I thought I could show cost of laminate flooring (to replace worn out carpet) as repairs on our return - or could I actualy show it as repair cost on annual reutrn.

Customer :

Your answer will conclude this Chat.

XXXXX XXXXX (baktax) :

As I say floor coverings ie carpet and laminate flooring are treated as furnishings and therefore come under the 10% wear & tear allowance if you replace them. If you repaired the existing carpet or laminate flooring then I would say yes you could claim the cost of that repair separately as you are not replacing the item.

XXXXX XXXXX (baktax) :

I hope this helps

XXXXX XXXXX (baktax) :

Please click the "accept" button

XXXXX XXXXX (baktax) :

Thank you and kind regards

Andrew Baker(baktax), Personal Tax Adviser
Category: UK Tax
Satisfied Customers: 756
Experience: 35+ years experience in income tax, CGT, non-residence
Andrew Baker(baktax) and other UK Tax Specialists are ready to help you
Expert:  Andrew Baker(baktax) replied 3 years ago.
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Expert:  Andrew Baker(baktax) replied 3 years ago.

I hope you found this helpful.

 

Please click the "accept" button to complete the process.

 

Thank you

 

Kind regards

 

Andrew (baktax)

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