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Business panel: How to qualify for mortgage tax relief explained

Business | Published:

MY family and i have recently moved from the UK to Guernsey and are looking at buying property in the island. We have heard that we can receive tax relief in Guernsey for interest paid. Is this correct?

Caley Clarke, tax senior manager at BDO Guernsey.

Caley Clarke, tax senior manager at BDO Guernsey, replies:

If THE property is for you and your family to occupy, tax relief on the mortgage is available in Guernsey, unlike the UK.

However, this is being gradually phased out.

To qualify for tax relief, the mortgage must be to purchase your principal private residence in Guernsey and the funds must be borrowed from a Guernsey lender.

The amount of loan on which tax relief is given is capped at £400,000.

There is also a reducing scale of the amount of interest paid that is allowable each year. In 2018 this is £9,500 per individual borrower, reducing to £1,000 in 2024, with no tax relief being available from 2025 onwards. These amounts double for married couples and those in civil partnerships, if they are each a party to the mortgage.

Note that from 2018 higher earners’ tax allowances and reliefs are restricted, by reference to a sliding scale, if assessable income exceeds £142,896. Therefore, depending on the level of your income and allowances and reliefs available you may not be entitled to mortgage relief.

If, however, you are purchasing property to rent out then interest relief may still be claimed, without restrictions, unlike the UK, as long as the amount borrowed is to purchase the rental property or renovations carried out on the property. It should be noted that excess interest paid over the amount of rental income received in the year will not be available to carry forward to future years, unless the property is in the process of being made available for occupation, then the interest can be carried forward to set off against the income in the first year let.

So, although reducing, mortgage interest relief is still significantly more generous than the UK and there is currently no intention to restrict interest relief on rental businesses.

Will Green

By Will Green
Business Editor

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