I have a small property portfolio. I am aware you can claim interest on all borrowings up to the property's value at the time it was first rented out.
So here's a scenario, lets say I purchase a property with 100% mortgage for £80,000. I paint it top to bottom, put new carpets in and the house is worth £100,000 when I first rent it out, a property investors dream.............. Okay, I know it's not realistic, but it makes the maths easy.
I can claim interest relief on the full £100,000. So assuming Mortgage @ 4% for £80,0000 how much interest can I claim for the remaining £20,000 ?
If I have a bank loan for a car at 7.9% would I use this, alternatively my home mortgage at 3% should I use this, what if I were fortunate enough not to have any borrowings, would I use Barclays base rate?
This then leads onto another question, lets say we use 10%, the company would then pay me £2,000 interest for loaning the company money, I assume I would need to declare this on my tax return. So therefore is there a maximum amount I would want to charge regardless to minimise my tax?
Its not something I have ever dealt with before, but hopefully my thoughts will be helpful
I assume that the property business is a limited company? Are you the only director/shareholder? Where have you sourced the £20k?
I imagine that you can charge the company whatever interest rate you like, and the question I would asking is what tax are you going to pay on the earned interest as an individual, compared with the tax saving on the interest cost in the company? If you are the only director, it's kinda all your pot when it boils down to it. Then I would be considering the implications of the administration - CT61.
