How to calculate mortgage interest?

[simon04]

Does anyone have any tips on caclulation of mortgage interest for filling in the tax return?

Basically, I get a mortgage statement which arrives in the middle of the tax year which is not itemised month-by-month. Of course, I need to quote the total interest paid in that tax year just-gone for offsetting.

Is it permissible to quote the whole interest figure from a mortgage statement which overlaps with another tax year? (assuming I haven't already claimed for this?

[Steve Sims]

Apportionment is the key for all bills that cross the tax year - mortgage interest, insurance etc.

Depending on how anal you are (ie an accountant) or not, you can either:

Divide the bill by 12 and mulitply by the number of months in each year

ie Insurance paid in January of #350 covers Jan 1 - Dec 31

Therefore 350 x 3/12 = the end of one tax year and 350 - (350 x 3/12) or 350 x 9/12 in the other

Many accountants would do this by days instead of months. HMRC does say not to worry about the odd 5 days in April.

[tenant29]

Ask your mortgage lender to issue a certificate of interest paid for year ending 5th April 2008.( quote your mortgage account number).

[simon04]

To throw a spanner in the works....

I can't get a statement from the lender for the end of tax year, as they'll only issue in January.

The trouble with this year is that the loan has been paid at different interest rates, so it's very hard to work out the actual figure.

Is apportionment actually compulsary for this type of cost??

[tenant29]

What company is your mortgage lender ? Never mind the customer service officer of Mortgage lender .

You should make a WRITTEN request to Managing Director of Mortgage lender company and the copy letter to Inspector of Taxes.

[King_Maker]

You are wanting a Certificate of Interest Paid, not a statement. The lender should provide this on demand/request.

[arusha]

Wickerman your calculation only works for interest only mortgages as with a capital repayment mortgage the outstanding mortgage would change each month.

[King_Maker]

Wickerman your calculation only works for interest only mortgages as with a capital repayment mortgage the outstanding mortgage would change each month.

Very true.

Even with IO loans, there can be a problem where there are non-allowable Further Advance(s) during the tax year.

[Mars Mug]

I assume the calculation could get quite complex depending on the mortgage type; I have a tracker mortgage which follows the base rate. I re-mortgaged my own house to buy my sister-in-law’s house, to rent back to her until she is in a position to buy back from me. For a variety of reasons I have three mortgages (all tracker, all the same interest rate) adding up to £120,000 but the purchase price of the house was £82,000. Would it be acceptable to simply use the total value from a Certificate of Interest Paid and multiply by 82/120?

[King_Maker]

I assume the calculation could get quite complex depending on the mortgage type; I have a tracker mortgage which follows the base rate. I re-mortgaged my own house to buy my sister-in-law’s house, to rent back to her until she is in a position to buy back from me. For a variety of reasons I have three mortgages (all tracker, all the same interest rate) adding up to £120,000 but the purchase price of the house was £82,000. Would it be acceptable to simply use the total value from a Certificate of Interest Paid and multiply by 82/120?

Only if the tenancy started on a 6 April for the first year only, otherwise a further restriction would apply.

Subsequent years should be OK, but see my earlier post.

I assume you charging her a commercial rent? If not, any Loss must be kept apart from the rest of your BTL portfolio (if applicable).

[Mars Mug]

I understand that the first year could be more complicated, in the case of starting after the 6th of April I assume I would reduce the value from the Certificate of Interest Paid proportionally? In any case I will be paying an accountant to do this for me.

I will be charging commercial rent (subject to housing benefit if agreed, a close relationship can be an issue), and I don’t have a portfolio. I only bought the house to stop her from being re-possessed.

[King_Maker]

Yes - but watch out for any interest rate changes during the tax year also.