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Early redemption penalties on B2L mortgages and their tax treatment

LANDLORD FORUMCategory: TaxEarly redemption penalties on B2L mortgages and their tax treatment
Early redemption penalties on B2L mortgages and their tax treatment 1Dave Cooper asked 3 months ago

I just wondered if anyone had come across this situation ? I know ERP’s are tax deductible in the same way as interest is ie on a now reduced basis since 2017/18, but can they still be offset against rental profits if we roll them up and pass them onto the next new mortgage ? I would assume yes as the debt is definitely there and we have taken the hit on the equity of the property ie the ERP has been added to the new loan. We are then paying a small proportion of the interest monthly on the ERP amount in the new mortgage. The question is I think , is the ERP tax deductible when it has been incurred ie added to the new mortgage or does it have to be paid upfront in cash to claim tax relief on it ?

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