Rental income tax relief

[shaneo]

Hi All

The following statement is in the key posts section - can someone explain it because its not very clear to me:

"IF YOU are investing in property, you should take out an interest-only mortgage.
Why?
You can write off the interest against the rental income in calculating your tax. So the real cost of interest is reduced by 47pc. So if you are paying 3.5pc interest, the net cost is only 1.9pc after tax."

Does this mean I write of the tax paid paid on rental income by the amount of the interest on an investment mortgage. Or does it mean I simply write off interest paid on an investment property mortgage against my normal PAYE?

Thanks

 

[ClubMan]

It means that you can take the amount that you pay in interest on the mortgage used to buy or renovate the investment property and deduct it from your rental income before calculating the tax due. Same as any other allowable rental property expense. This has nothing to do with PAYE income. If you don't understand the tax treatment of an investment property then you should read the FAQ and get independent professional advice before getting into this business. If you are already then you really need to talk to an expert ASAP.