Interest on investment property tax deductable ?

R

rabbit

Guest
A friend and I had a discussion over a pint at the weekend. He reckoned if somebody self employed had an investment property they were paying bank interest on, this interest would not be allowable as an expense against their normal income. I said it would be. eg if someone has 35 grand a year income from their normal job, but is paying 10 grand a year interest on a development property ( which has no income / tenant ) , they should only be taxed on the 25 grand ?

Thanks in advance for any replies - I am owed a pint next time we meet if I am right !
 
You can claim mortgage interest against rental income on that property only (and subject to conditions - do a search; there's a heap of info/threads on that topic) but NOT against normal income, as Ubi rightly points out.

Sprite
 
There was a position some years back in relation to seaside resort relief whereby relief could be granted against from income from all sources. This loophole was spotted and relief ringfenced. Planning on these properties had to be applied for before specific date in order to claim deduction from income from all sources. There has never been a case whereby unused interest paid on an investment property can be set against PAYE income.
Maybe this is what you are getting confused with (or at least tell your friend that to save face!!)
 
advisor said:
There has never been a case whereby unused interest paid on an investment property can be set against PAYE income.
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Thanks for all the replies. The person concerned does not have a paye income, and is self employed...some of his income does come from properties which are let out. As the property which is costing 10 grand a year in interest is part of his business ( it was not purchased for personal use ), does he really have to pay tax on the business turnover he uses to pay the interest on his business expense ie the business mortgage ? Its bad enough paying 10 grand in interest but having to earn say 16 grand or whatever to pay the interest is a different thing ...having to find say 6 grand extra in tax at the end of the year.
 
rabbit said:
Thanks for all the replies. The person concerned does not have a paye income, and is self employed...some of his income does come from properties which are let out. As the property which is costing 10 grand a year in interest is part of his business ( it was not purchased for personal use ), does he really have to pay tax on the business turnover he uses to pay the interest on his business expense ie the business mortgage ? Its bad enough paying 10 grand in interest but having to earn say 16 grand or whatever to pay the interest is a different thing ...having to find say 6 grand extra in tax at the end of the year.
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Are you saying that the property concerned is the one from which the persons business is run or is it just a property which is rented? It's just that the original post gave the impression that it was a rented property.

If it is the property from which the business is run , e.g. a pub or a shop etc, then the interest is allowable against the trading income.

If it is rented then the interest is only allowable ( as stated by others ) against the rental income.
 
Graham_07 said:
Are you saying that the property concerned is the one from which the persons business is run or is it just a property which is rented? It's just that the original post gave the impression that it was a rented property.
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Thanks for that. THe property is basically an old house which is unoccupied, and not let due to its poor condition. The property concerned is only used in a small way by the person....he is a sort of tradesman and uses a room or two of it to store some materials in.
 
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