Reducing tax on rental property

[landlord]

If you bought a rental property a few years ago at say 250,000 with an 80% loan which is 200,000, (at 3.29 % currently), you can off set the interest paid (200,000 x 3.29% = 6580) from your rental income. If the property is currently worth 400,000, would it make sense and indeed can you re-mortgage this property back up to 80% again of the current market value (80% of 400,000 = 320000), use this equity released to reduce my home loan (ppr at same rate 3.29%) and once again maximise the interest I am paying on this rental property (now 320,000 x 3.29% = 10528) there by reducing the taxable profit on rental income???
thanks!!!!

 

[RainyDay]

Revenue tax relief rules depend on the purpose of the money, not what property it is secured upon. So if you do equity release on your rental property for the purpose of paying down your home loan, the additional interest you pay would not qualify for tax relief against your rental income.

It does make perfect sense however, to accellerate payments against your home loan as a priority of payment against your rental property.

 

[bearishbull]

how would they know?if you sold the house and bought a similar one with an 80% mortgage you could write off more interest,but because of stamp duty CGT etc it wouldnt be worth it .

 

[RainyDay]

how would they know?

In the same way as they 'know' for all the other self-assessment taxes - by audit, by investigating, by informants, by watching for exceptions etc etc.

 

[Purple]

Even if Revenue didn't find out it's still against the law.
Go interest only on the rental property and pay down your PPR mortgage if you want to maximise you use of your tax relief.