BTL can interest be offset if mortgage property not let.

[Hariseldon58]

I have three properties which are all let.

A & B were purchased with mortgages and C is owned outright.

I am considering moving into property A, can I still claim relief on the interest on the loan on property A ? on the basis that the total debt on the loans is less than the value of the remaining let properties B & C and the loans were taken out to finance rented property.

A & B are residential property and C is commercial. I have seen reference before to a mortgage being taken on principal private residence to finance a rented property purchase and this was allowed on the basis that the purpose of the loan was to finance a rental. I am thus wondering if one can do the reverse after the fact..

Opinions welcome

[JonE]

I am considering moving into property A, can I still claim relief on the interest on the loan on property A ? on the basis that the total debt on the loans is less than the value of the remaining let properties B & C and the loans were taken out to finance rented property.

The security (if any) for a loan used in your letting business is not relevant - the debt is portfolio-wide and not associated with any single property. The limit to the loan value on which interest may be claimed is not connected with current valuations but is based on the aggregate values of the let properties when each was introduced to the lettings business (and adjusted for any capital improvements since then).

My initial take is that if the outstanding total of the two mortgages is less than the combined value of B and C at the date each was introduced to your letting business then all interest is claimable against the income from B and C. If greater then some apportionment of interest paid will be necessary to determine what is claimable.

If you have previously chosen to volunteer the information about how many properties you let then a reduction in the count may set a flag somewhere in HMRC systems but providing that datum is not mandatory and I have never provided it.

This picture can present a gotcha for some. Sell a property which has a relatively light mortgage secured on it when other properties have become more heavily mortgaged over time and one has then to redeem the mortgage secured on the sold property from proceeds, pay any CGT on the disposal and then (possibly) either have some of the interest on the remaining loans disallowed because the original cost (plus any capital improvements) of the portfolio is now less than the loans outstanding or else use some/most/all of the net proceeds from the sale to reduce the overall debt such that it doesn't bust the limit.

Cheers!

[Hariseldon58]

Thanks JonE

Thats what I was hoping.