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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My husband and I have a btl property and a residential property.

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My husband and I have a btl property and a residential property. A 2 year interest only mortgage was raised to buy the btl property. At the end of that mortgage arrangement we were advised to have a new 2 year arrangement by splitting the mortgage between the btl and our residential property, both interest only. The time has now come to renew this arrangement, and we have been told to keep it as a split mortgage but we don't know if it is better to have the mortgage more on one property or the other.
We know we can claim the interest on the btl mortgage against the income from that property but are we also able to claim the interest of the mortgage on the residential property against the btl income as well as it was only taken out originally to buy the btl property?

There is no requirement that the mortgage used to buy a property for letting has to be secured on the property in question. It can be secured on another property depending on the lender's requirements and the interest will be deductible from the rental income as it would if the loan was secured on the let property itself.

It follows, therefore, that the interest paid on a split mortgage can be deducted from the rental income to the extent that it is replacing a mortgage which was used to buy the property originally or to replace a split mortgage which itself replaced a mortgage which was originally secured on the let property.

I hope this helps but let me know if you have any further questions.
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Customer: replied 3 years ago.

Thank you, ***** ***** news and if needed there is a trail to show the split mortgage leads back to the original single mortgage to buy the btl property. May I ask an additional question - the btl property is about to be re-let to a couple but they are asking for it to be let to them in their company name, but with them as the permitted occupiers. Does it matter as far as we are concerned if we let it to a 'company' or does it have to be named individuals?

It doesn't make any difference as far as your tax position is concerned but you need to be sure that the company is bona fide. Your lender may need to know.