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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Let property vacant period. Mrs A remortgaged Mrs A main

Resolved Question:

Let property vacant period.
Mrs A remortgaged Mrs A main residence (property A) to a "Buy to let" mortgage, property A will be let out.
With the capital released Mrs A bought a new property (property B). Mrs A has moved to live at property B.
Property A was remortgaged to "Buy to let" mortgage in Aug-2015. Mrs A moved to property B in Aug-2015.
Property A has been vacant Aug-2015-Mar-2016, therefore no rental income.
For tax year FY15/16 can Mrs A claim mortage interest, service charge & council tax as expense in relation to rental property (essentially a loss) to be offset against future rental income of properyty A?
Property A is currently undergoing renevation work and is expected to be occupied from July 2016 (rental income will fall in tax year FY16/FY17).
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.


If you look here, you will read that rent won't be deductible until the property is first let if that property was previously the main residence of the person letting it. The same applies to mortgage interest until the earlier of the letting starting. I would say the same principle would apply to council tax and service charges. None of them were incurred wholly and exclusively for the purposes of letting the property.

I hope this helps but let me know if you have any further questions.

Customer: replied 1 year ago.

Would a change of mortage type from a "residential mortgage" (when living at the property) to a "buy to let mortgage" (once moved out of the property) not make a distinction for start of letting trade from the point mortgage type is changed?

Buy to let mortages are for letting only, cannot be used for the purpose of private main residence.

Expert:  TonyTax replied 1 year ago.

You could make the claim on the basis that it is a buy to let loan but, given that the remortage wasn't only to replace the mortgage on A but some of it was used to buy B, any claim for relief may be restricted proportionately. Usually, however, if a property is put into letting, all the mortgage interest paid on mortgages which exist prior to letting will be deductible.

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