Mortgage Interest - off setting against rental income

[Jess3]

Hi,

I own a rental property which has no mortgage on it. I want to re-mortgage this property in order to raise funds to purchase a residential property for me to live in as my sole residence.

Am I able to offset the mortgage interest against rental income despite using funds borrowed going toward another property purchase?

Many thanks in advance for any advice received?

Regards

[TaxAdvisor]

Hi Jess,

Yes it is possible to claim tax relief. If you show that your intention with the new borrowing is to 'extract capital from the rental business'.

The way to look at it is you are replacing capital in the rental propety with borrowing. This effectively extracts the capital and then it is this capital fund you are using to purchase a new residential property.

It doesn't matter when you actually spend this released capital as the borrowing now sits against the rental

[Jess3]

Thank you very much for your help! I really appreciate you taking the time to respond.