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 We have a client who has a buy to let property which has been financed by an offset mortgage. The repayments consist of capital and interest. However, the mortgage interest payable, is offset on a daily basis by the interest earned on a linked savings account and mortgage current account. But there are months when due to the mortgage current account being overdrawn, there are interest charges rather than interest received, resulting in this being added to the monthly mortgage interest. What actual interest charges should be taken into account when charging against the rental income for tax purposes. Many thanks.
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7/2/2012
Rachel-Mod
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Customer reply replied 5 years ago
Yes, we still need an answer a.s.a.p. Thank you.
TaxVince
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My take of this is the interest is deductible since i guess the, the current mortgage account is used 'wholly and exclusively' for the purpose of the property,. Therefore the interest charged on current account can also be offset.

I guess the same principle that applies to someone who does not does not have the a deposit readily available for a mortgage who get finance finance maybe through a personal loan /overdraft / overdrawn current account etc. that is used 'wholly and exclusively' for the purpose of the property, then the interest charged on this loan/overdraft/overdrawn current is deductatable for tax purposes.

If you are satisfied, could you please revise the rating to a positive feedback and that would be greatly appreciated. If not completely satisfied, prior to leaving feedback, please get back to me.
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Customer reply replied 5 years ago

Do you mean that the interest charged on the mortgage current account can be added to the mortgage interest and the notional interest received on the savings account needs to be deducted from the mortgage interest payable.


Thanks.

yes - preciously.
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