Income tax on renting home whilst on a mortgage holiday?
Hi,
I am looking at renting out my property for a year or two whilst things settle and renting a new property whilst living away.
I understand that you pay tax (at 40% as already have a job) on any amount that is deemed profit once you have allowed for mortgage, agents, upkeep etc
What I am not sure of is that we are taking a mortgage “holiday” atm from our lenders. As such we are not making any mortgage payments although the interest still builds up. Do we still allow for the interests part of the mortgage payments? Would it be more prudent to start paying the interest amount of the mortgage payment to our lendder again to avoid getting a hefty tax bill at the end of the year?
How do I calculate the interest portion of our monthly payments? I do know that about 70% of our yearly payments are interest and the rest actually pays thte mortgage – based on last mortgage statement.
Hope this makes at least SOME sense :O)
Thanks
You are wrong to suggest that mortgage payments are an allowable deduction against rental income.
This is only the case if you have an interest only mortgage.
If you have a capital/interest mortgage, which from your question you clearly do, then the only allowable deduction which you can make against your rental income is the interest on the mortgage.
You will still be receiving mortgage statements from your mortgage provider during your mortgage holiday and this will detail the interest which has been accruing during this period. You can therefore easily work out what the interest payments have been during the fiscal year in which you have been renting out the property.
Ignore the joker who has answered your question before me. He is talking complete tosh.
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