Hi,
I am in the process of switching an existing mortgage with TMW to a new deal. Some deals are free of arrangement fees and are generally around 3.00% per annum but they are offering a 1% per annum deal for one year with a 2% arrangement fee. Both deals work out at around the same amount of overall cost but I’m wondering because interest payments are capped at a 20% tax allowance is the arrangement fee regarded as interest or an expense tax wise?
Hope that makes sense.
Many thanks
Pete
if you have an accountant ask them .I am guessing yes as it is a business expense
The restriction is for finance costs, not interest, so includes all related costs, so arrangement fees are restricted to 20%.
From the original budget announcement (https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords#:~:text=furnished%20holiday%20letting.-,General%20description%20of%20the%20measure,basic%20rate%20of%20Income%20Tax.&text=Finance%20costs%20includes%20mortgage%20interest,or%20repaying%20mortgages%20or%20loans… )
“Finance costs includes mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans.”
Hi Colin,
Thanks for your reply and yes I will contact my accountant to clarify.
Hi Cath,
Thank you for such an informed reply and looks like you are right, I was purely looking at interest rather than finance costs. Shame though, hoped it might have benefitted.
Exactly why all finance costs are included, otherwise every BTL mortgage would be 0% interest with a massive fee 