Is tax relief on personal remortgage or mortgage interest funds available if: (1) funds are withdrawn for personal use and not reinvested; and (2) remortgage funds are reinvested but exceed the purchase price of the properties?
Arthur Weller replies:
See HMRC’s Business Income manual at BIM45700, Example 2 , here you can see that tax relief (per the 'new' rules) is available in the remortgage circumstance that you have described. However, if the total mortgage on the property now exceeds the purchase price of the property, only the amount of interest that corresponds to the purchase price of the property is allowable. For example, if the property originally cost £200,000, but due to a rise in the market value of the property the owner is now able to borrow £250,000 against the property, only 80% of the interest will be allowable.