Tax Implications on Paying off Investment Property

[corklad74]

Hi,
My girlfriend who is scottish bought a one bedroom flat in Glasgow about 10 years ago for £28,500 (sterling). She has an interest only endowment mortgage. The flat is rented out (most of the time) and my girlfriend has been filling out UK tax returns each year and hasn't owed anything in tax thus far.

Together we bought a house in Dublin about 2 years ago which is now increased quite a bit in value. We are anxious to top up our Irish Mortgage by about 45000 euro and pay off the £28500 on the flat. The interest rate she is currently paying is 6.5% and together with management fees erodes any real profit from the rental income. I have a couple of concerns which somebody might be able to help me with.

• If we continue in the present arrangement does my girlfriend have to make some declarations to the Irish revenue regarding the flat in Glasgow. She has been resident and working here for 3 years now.
• If we pay off the mortgage in Glasgow what are our tax implications in Ireland and the UK. I presume we would not get hit in both jurisdictions or maybe we would. Can we right off the mortgage interest on the 45000 against the rental income for Irish tax.
• If we were to sell what capital gains would we have to pay UK or Irish. Surely not both!!

The flat is currently worth around £60k - £65k and is in an up and coming area of Glasgow city centre.

Thanks in advnace

 

[asdfg]

Together we bought a house in Dublin about 2 years ago which is now increased quite a bit in value.

I trust you did not claim that you were first time buyers. If either of you owned a property anywhere you can't claim to be FTB and you must also pay the appropiate stamp duty.

If we continue in the present arrangement does my girlfriend have to make some declarations to the Irish revenue regarding the flat in Glasgow. She has been resident and working here for 3 years now.

Yes she is an irish resident for tax purposes and she will have to make a declaration to irish revenue of profit from rental income. There as gererous allowances to reduce the tax payable see [broken link removed]

If we pay off the mortgage in Glasgow what are our tax implications in Ireland and the UK. I presume we would not get hit in both jurisdictions or maybe we would

Afaia You have to make a tax return in UK and Ireland according to the rules in each country. Different rules apply to each country. You then offset any tax paid in UK against tax due in Ireland.

Can we right off the mortgage interest on the 45000 against the rental income for Irish tax.

Yes, you can. Remember it is the interest only that can be claimed.

If we were to sell what capital gains would we have to pay UK or Irish. Surely not both!!

Again you have to pay CGT in UK first which I believe is 40% (not 100% sure of this figure) and then declare the gain to Irish revenue (any gain is payable to irish revenue at 20%)
In this instance there will be no tax payable to Irish revenue