Take Advantage of Mortgage Interest Relief in UK Tax Filing

Hi everyone, I’m Keith Griggs, a Deloitte trained chartered accountant . I want to help you understand better the mortgage interest tax deduction relief for investment properties in the UK whether owned personally or by a company.

When you own a rental property personally, the mortgage interest is not deductible in the initial calculation of your taxable rental income. But you would get up to 20% relief on your interest payments. But you would be taxed at 40% or 45% if you are a higher rate tax payer. So this is not good.

However, if you own the same property through a company, the mortgage interest is fully deductible as a business expense, lowering your company’s taxable income. This is much better.

This is why many property owners opt for owning properties through companies as it reduces their tax liability. But it’s important to keep in mind that owning a property through a company also comes with its own set of complexities and regulations.

For most but not all people, it is best to buy investment property through a limited company. 

So, which one is better for you? It all comes down to your individual financial situation and goals. Generally, the more property you have, the better off you will be if you invest through a company.

Do you own a rental property? Are you considering changing the ownership structure to a company? This is problematic because of capital gains tax and stamp duty. There are some reliefs available, but you need to have good advice to navigate this, as it can get very complicated. Share your thoughts in the comments below!