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GJMSurrey
21-10-2010, 19:10 PM
Dear all,

I have a £100k offset mortage, which is 'shown' as separate accounts as £60k (additional borrowing used to pay off a but to let mortage) and £40k (remortgage) on main home.

However the interest is aggregated and taken from one account.

So if I have £20k savings and intend to have that reduce the interest on the remortgage amount first (thereby not affecting the amount I can put against my ental income), I have a problem as I cannot evidence this and the taxman could argue that any savings are offset pro-rate agaisnt the total borrowing.

Am I being naive by writing a dated statement describing my intentions and having this signed and dated by a solicitor as witness? Thereby showing that I made this choice if questioned later?

Many thanks for any ideas
Phlash
22-10-2010, 13:40 PM
The tax man cannot dictate to you what decisions you make, he merely taxes the consequences of your decisions.

If you nominate that the £20k is to pay down the personal mortgage then so be it. You do not have to justify why, the tax man cannot demand that you do so.

Going forward, rather than 60% of interest being deductible, it will be 80%. The actual cost entered into the tax return will still be interest on £60k, so it will look no different to the tax man.

If you have a note of the fact when you pay down the personal mortgage then this is great support, but even without it the taxman would struggle to argue that the repayment should be evenly allocated.

The main evidence to support your filing position will be a balance on the mortgage itself. i.e. one will be £60k and one will be £20k.

Your worry would be akin to the following scenario. One home and one investment property. BTL mortgage is interest only and main home is repayment. HMRC coming back to you and demanding that you spread the repayment of any loan over the two - which he simply cannot do. Your business is your business and you are taxed on the consequences and the business decision to pay interest only stands.