Landlords Mortgage Payments - how do you ‘explain’ them to ensure they are picked up by HMRC for the 20% tax relief

Question asked by Bev Cooper 2 months ago

Hi There,

I am just going through ‘explaining’ transactions to date on my imported bank transactions for this financial year.

I have set up ClearBooks to link to HMRC for the new ‘Make Tax Digital’ requirements.

Which account should I allocate my buy to let mortgage payments to, to ensure they are recognised by HMRC for them to give me the 20% tax relief on mortgage payments? There isn’t a specific ‘Mortgage payment’ code, only mortgage interest.

Many thanks

Bev

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4 Replies

Hi Bev,

Mortgage interest is not considered a standard business expense for tax purposes. Instead, a tax credit equivalent to 20% of the mortgage interest (regardless of the tax band) is typically applied to the final tax calculation.

You will need to split the payment and explain one part to the “Mortgage capital” account and the other part to the “Mortgage interest” account.

The MTD submission will send these amounts to HMRC to make sure the correct tax credit is applied to the year end calculation.

Tommy

Best answer
2 months ago

Hi Tommy,

Yeah I get that it is just 20% mortgage relief on the interest.

As far as the explaining the monthly mortgage payments on the imported bank statement - should I just put these against `mortgage capital’ - then it will get ignored by HMRC?

I only know how much interest I have paid when I get the annual statements from the mortgage company - when I have done the tax returns on HMRC there has been a box where you enter the mortgage interest (in the ‘residential property finance cost’ box on the self assessment - when you come to do tax return prep on ClearBooks is there a box where you enter your mortgage interest?

Thanks again

2 months ago

Perfect - thank you Tommy.

2 months ago

Hi Bev,

Yes, if you select Mortgage Capital, it will be ignored for the 20% relief. And yes, you can adjust this on the MTD Tax Return account at the year end.

Tommy

2 months ago

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