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Old 05.04.2007, 13:32
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Re: Can anyone help with a UK tax question?

I was looking at renting my house out, there is a tax loophole here that can be exploited;

1) Rent it out for LESS than your monthly mortgage amount (by not much, say £10 a month)
2) Because you are making a loss overall, you do not get taxed as there is no profit to be taxed on
3) End of the year, remortgage the property to release equity - there's a level beneath which the govt do not tax you for released equity from the property, from memory I think this wass £10k when I looked into it
4) Contact your tenants and advise them that due to interest rate changes etc there's an increase to the monthly rent of "x", where "x" is enough to make sure that a) it's still less than the mortgage, and b) it's enough to cover the increased cost per month from the remortgaging.

This way, you cost yourself £120 a year in being "under" your mortgage amount, but get back £10k a year tax free. The only thing to be sure of is that you have the house full all the time, but thats the same with renting it anyway.

You do still have to declare all of the above to Inland Revenue, but because you're effectively trading at a loss and just remortgaging, it's all totally legal and above board, and they can't touch you for it. My friends uncle gave me this advice, he's been doing it about 30 years no problem.
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