HMRC - claiming for your mortgage

[MrAnchovy]

The presenter (an HMRC business advisor) looked at the handout and said it was incorrect.

Sorry, I had to laugh. Those words in the handout are the source of much confusion, and they are not in the version published on the HMRC web site.

Unfortunately BIM45745 is also bit confusing because it was written when everyone could claim tax relief for the interest on the mortgage on their own home under MIRAS - this ended in 2000. But the part that relates to business use is still relevant so I have edited it to remove the MIRAS bit if that makes it easier to understand:

Where part of a property is only sometimes used for business purposes (but for a significant amount of time and then exclusively) interest payable on a mortgage secured on the property may be apportioned on any reasonable basis that takes account of both the proportion of the property so used and the duration of such use.

A deduction as a business expense may then be allowed for the interest on the part of the mortgage attributable to business use.

So yes, you can claim a proportion of mortgage interest.

[auntym]

Ok. So does it go like this? Childminder does 40 hours in two rooms downstairs. Plus kitchen. Mortgage is 500 of which 100 is interest. How the hell do you work it out?

[auntym]

Is it. 100 \ 8three rooms downstairs and 5 up. Then times the amount by the rooms you use lol

[MrAnchovy]

There is no set way. The calculation needs to fit whatever the circumstances are, and take into account both the fact that only part of the house is used for childminding (if that is the case) and that the parts that are used for childminding are also used as your home for part of the time (which needs to be the case otherwise there is a potential Capital Gains Tax liability whether you claim mortgage interest or not).

HMRC provide some examples: Example 4 is probably the most relevant for a childminder. Note that this apportionment method can be used for all household expenses including council tax, insurance, rent etc. and in many cases will result in a larger claim than the 'concessionary' 10% even without taking mortgage interest into account.