High Clarity Accountants

TAX TIP OF THE WEEK – Use a loan swap to get tax relief on your main mortgage interest

Ordinarily, the mortgage interest you pay on a home is not an allowable deduction against your income for tax purposes.

However, if you have built up some value in your company over the years, then with a bit of re-structuring you could get tax relief on the mortgage interest. This would work as follows:

1. You sell your company shares to your wife so an amount ideally equivalent to your current mortgage
2. Your wife funds this purchase by extending the existing mortgage
3. You then use the money to pay off the original mortgage amount
In effect, this will have swapped a loan that was not allowable to a tax deduction to one which is.

There is no CGT payable as it is a transfer between spouses. Although there may be a little stamp duty payable on the loan purchase, the tax saving for a high rate taxpayer far outweighs this.

Hope this was helpful, for lots more tax tips and strategies get a copy of our 71 ways to save tax checklist https://bit.ly/2YQbhvr

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