Hi,
I am filling in Self Assessment online. My Buy To Let mortgages INTEREST only.
Can anyone please tell me in which box, I need to enter the mortgage interest on Self Assessment? Is it in the box - UK Property 43 - Residential property finance costs?
Thanks,
Assuming it is a residential rather than commercial let.
Thank you so much for your help.
In my online form, it is box number 43 - UK Property 43 - Residential property finance costs.
Thanks
I don’t think you can claim the mortgage interest as finance costs now. It has been removed a few years now.
that is correct .no tax advantage now
There is tax advantage.
You cannot claim a tax deduction for the interest, but you get a ‘finance costs’ credit at 20% instead. So you do get some relief, but only at 20% so you were worse off if you are a higher rate tax payer.
Any mortgage related costs, such as arrangement fees, interest etc, go in the finance costs box.
You then get a credit for the lower of (effectively):
The finance costs
Your rental income
Your income taxable at income tax rates
Any that you can’t deduct gets carried forward to use in future.
So, it can actually be an advantage if you are a low earner because if you have no tax to pay (eg if you’ve had a lot of repairs), you can carry the finance costs forward to use in a later year when you do have tax to pay. When interest was just tax deductible as other costs, you would have had to use the interest in the year whether you had tax to pay or not.
It can make you a higher rate tax payer too. Eg. Income £40k, rental profit before interest £20k, interest £10k. In the olden days, your taxable income would have been £50k (40+20-10). Now it is £60k with a £10k finance cost credit. So you pay higher rate tax on £10k and get a deduction at 20% for the interest, so it costs you an extra 20% tax on the interest.
It can have an effect for things like student finance and child benefit because your income for that is based on your income before the finance credit.
So, in the example above, old rules: income £50k, no child benefit repayment. New rules: income £60k, all child benefit to repay.
There are some HMRC examples here: Tax relief for residential landlords: how it's worked out - GOV.UK
2 Likes
No, finance costs are the new thing. The ability to deduct interest as a normal cost had been phased out over previous tax years.
All interest is now allowable as finance costs with a tax credit at 20%.
2 Likes
Thank you so much Cath2
1 Like