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Senior Partner
Senior Partner, Solicitor
Category: Law
Satisfied Customers: 13329
Experience:  Solicitor with more than 30 years experience
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We have a second property which we do not get any income from

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We have a second property which we do not get any income from as it all goes to pay off a loan which we took out to buy the property.As my husband and I are on low incomes we are going to apply for tax credits.Will this affect the decision?
Hi thanks for your question. the answer depends upon how much of the revenue from the property is used to pay interest on the mortgage and how much is used to pay capital. If there is not profit form the letting because the expenses which included loan interest use up all the rent income then it should not effect your tax credit claim but if you are using the income to pay the capital back then that is not allowed as e deduction form your income.
Let me know if I can clarify further
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Customer: replied 3 years ago.

We have no mortgage it was just a loan with interest. No profit is made at all and we have to put extra to it every month to cover the rates

OK Thanks. It doe snot matter whether it is an ensured loan or a mortgage. The interest element is allowable as a deduction from the income but the capital repayment is not. So if you are only paying interest then you can deduct all the payments.
Presumably you need to keep accounts for the property for tax purposes and if there is no profit it will not affect your tax credits