Did you know about paragraph 45700?
Question If I release equity from my investment property, then can I offset the interest charges against my rental income if it is used for my personal use and not for the purpose of the business?
This has been a hot debate circulating amongst the UKs top tax professionals for quite a while.
The consensus now is that YES it can be offset in certain circumstances, something that I had always personally maintained.
This is because of a gem of a tax rule contained in paragraph 45700, in the Inland Revenue guidelines.
I will be providing a full breakdown of this tax break in next months newsletter to explain in detail how it works and how it is going to be used to reduce your income tax bills even further!
Bill buys an investment property for £200,000.
The funding is made up with £50,000 from his personal savings and £150,000 via a buy-to-let mortgage.
Two years later, the property is worth £270,000.
Bill decides to release equity from the property to the value of £50,000 to buy his brand new BMW sports car.
Now, the interest that is charged on the additional £50,000 can be offset against the rental income from the investment property according to paragraph 45700.
This is because you can get interest relief to the value of the property when it was first let.
This superb tax break brings about a number of generous tax saving methods!
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