I am sure this would help.You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question,Warm Regards,
Thanks for your response.
I would like to clarify that my question was intended to look for a tax focus rather than the implications of opting for an interest only mortgage. I am aware of those and the intention is to set aside money to pay the capital during the term with overpayments and at the end with the savings. Just to make it easier to understand and putting it with numbers the first mortgage is on repayment of capital and interest, monthly payments of 380 and receive rent of 500 therefore 120 profit, the second flat has an interest only (intended) mortage of 200 per month and receive a rent of 700 a month so my intention is to put aside 500 to either make overpayments monthly or open an ISA in order to save for the repayment at the end but my question is for tax purposes what would be the most effective way of declaring the income because as I understand it even if the first rent only makes 120 profit and the second probably will leave less profit, the TAX office will see the full 500 for first flat and the full 700 for second flat as income so how can I demonstrate that most of the money will go back into the loan or if an ISA or a number of them are a good option.
Please let me know if you will be able to provide the answer as the first answer was not as expected, thanks in advance
Many thanks that is much clearer for me, just to make sure I understand you correctly, you are saying that although the rental income will be considered as income, the tax office do take into account the interest I have to pay (and the capital?) in order to apply the taxes. In other words, In the example of 700 rent, the taxable income is 500, therefore taking into account the 200 interest but not the overpayments towards the capital repayments. Would that change if I opted for capital repayment mortgage or the taxable income is always all profiot excluding interest? And in that case do I need to start self assessment or the bank initiates that or the tax office? I want to make sure because I currently dont do self assessment. thanks in advance