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Can this interest be claimed as a business expense?


I have taken out an interest only mortgage on my PPR in order to finance my property development business and enable me to acquire property as a "cash buyer" prior to mortgaging on a Buy-to-let mortgage.


Can this interest be claimed as a business expense?


Arthur Says

The fact that you have taken out an interest only mortgage does not mean that the interest can be claimed as a business expense. This is because you are continuing to pay the interest on your main home.


However, if you released equity out of your main home, i.e. increased the borrowing, and this additional money was used for buying further properties then the interest charged on the additional borrowing can be offset. This is because the additional loan has been used for the purpose of your property business and therefore the interest can be offset.


Consider the following case study:


Ali is desperate to buy his first investment property after seeing his own house value almost double within 5 years.


Unfortunately, (due to his lavish lifestyle), he has no savings of his own but is in a well paid job, earning £40,000 per annum.


He sees an investment property advertised for £100,000, but his mortgage lender requests a deposit of £15,000.


He sources this deposit by releasing an additional £15,000 of equity from his main home.


The bank then agrees to finance the remaining £85,000.


This means that Ali has a 100% financed investment property. It also means that he is able to offset the interest charged on both his equity release of £15,000 and the BTL £85,000 mortgage against his rental income.



Case Study

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