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bigduckontax, Accountant
Category: Tax
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Hi, I am finishing my tax return and I wanted to find out about

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Hi, I am finishing my tax return and I wanted to find out about offsetting mortgage interest against my rental income from a flat I own. I realise that I can offset the interest payments directly relating to the mortgage on my rental flat but I was recently told my a financial adviser that there were circumstances in which I can also use the interest (or a portion of the interest) on the mortgage payments on my primary home against this income too. Are you able to explain whether this is acceptable within HMRC's rules? Thank you
Hello, I'm Keith and happy to help you with your question.

Your question is of interest as there has been a dispute between experts on quite another matter in which advice by PxC's (it was PW then) tax department obtained pro bono by a partner was involved. We followed this advice and it raised not a hair with the Inland Revenue as they then were, but PW's opinion caused uproar on the Just Answer site recently!

Now in your case HMRC's advice is not terribly good. If you use say a room in your residence exclusively for your business then elements of the house costs are available as an offset against profits. However, if the use is not exclusive then the advice becomes a trifle vague. It would appear that if parts of the house are used for short periods for the business than an appropriate element can be charged, but I warn you that the advice is far from clear. Perhaps that is what your financial adviser is getting at? I would be inclined to ask him for fuller and better particulars of what exactly he is getting at!
Customer: replied 5 years ago.
Hi Keith,
Thanks for getting back to me so quickly. I don't think I explained my question very well, apologies. The example he gave me was clients who have a debt free primary home outside London and buy a couple of investment properties in London. He said that in that instance they were able to place the mortgage debt on their primary residence which is cheaper as it is not buy to let, but when they did their tax return they could offset the mortgage interest on their primary residence against their rental income from their investment properties. On that basis he said that i should also be able to offset interest payments on my primary home's mortgage against rental income on my investment property. This is the point I wanted to get a third party opinion on. I am not using my primary residence as an office to any significant extent. Many thanks for your feedback.
Hi Guy, I see what you are getting at!

He is suggesting swapping mortgage debt. That is all very well, but it doesn't come cheap and may raise hackles with lenders. Some mortgage providers are very parochial and would jib at such procedures. The more commercial suppliers of mortgages might well take it in their stride, but could cost more. In addition there will be the charges incurred in switching the land charges on secured premises which will have to be done professionally to ensure that there are no mix ups in the Land Charges Register.

You will have to do a lot of research into this to see if it is cost effective as it might be in the long term. The ball is now well and truly in your court!

I do hope I have been of some help, regards, Keith
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