Liability for tax on rented apt

Hi All,

My girlfriend & I are in the process of buying a house & are getting a few mixed messages about what to do with her existing apartment. She has a two bed apt with a small enough mortgage. We're planning to release some equity from the apt & have been told this is no problem by the bank. Am I correct in thinking that if the income from the rent we receive is the same/less than the mortgage, that she can declare it & not face a penalty as she's not making a profit? She's had it for two years so it's also my understanding that she's not liable for any clawback on the stamp as she was first time buyer when she bought?

Secondly, if we get a mortgage with both of us on it but just my name on the deeds how likely is it that we'll end up having to pay stamp on the house as I'm a ftb?

Any advice much appreciated

Poptart said:

We're planning to release some equity from the apt & have been told this is no problem by the bank. Am I correct in thinking that if the income from the rent we receive is the same/less than the mortgage, that she can declare it & not face a penalty as she's not making a profit?

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No - totally wrong. She can offset interest on the currently outstanding mortgage against rental income. She cannot offset interest on any topup used for purposes other than purchasing or renovating the property against rental income. The size of the mortgage repayments versus the rental income collected is totally irrelevant.

She's had it for two years so it's also my understanding that she's not liable for any clawback on the stamp as she was first time buyer when she bought?

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Correct assuming that she did not rent it before November 2007.

Secondly, if we get a mortgage with both of us on it but just my name on the deeds how likely is it that we'll end up having to pay stamp on the house as I'm a ftb?

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You are jointly not first time buyers. This trick is illegal if she actually in reality has a vested interest in the property and contributes towards the purchase.

You also need to consider CGT.

See also [broken link removed]. There are other deductions she can make but generally interest on the mortgage is the biggest. She will also have to register the property with the PRTB in order to claim the interest as an expense.