Mortgage Product Fee

Hi, I'm currently filling in my self-assessment form regarding expenses related to UK property (SA105) for tax year 21-22. In Jan 2021 I took out a Buy To Let mortgage which had a Product Fee. I now realise that the Product Fee is a finance expense as it is a fee incurred when taking out or repaying mortgages as described here: https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords My question is can I add this as a finance expense in my self assessment for 21-22 even if the mortgage was taken out Jan 2021? Thank you.

Hi,

You will need to amend your 2020 to 2021 tax return to include the product fee as a deduction.  

The deadline for amending your 2020 to 2021 tax return is 31 January 2023.  

Please note you cannot declare the deduction in your 2021 to 2022 tax return.

Thank you. 

Do we have to pay mortgage product fees in full to claim this as expense?

Hi Bee Kay

Please have a look at BIM45815 - Incidnetal costs of loan finance.  You can only claim for those costs incurred.
BIM45815 - Specific deductions - incidental costs of loan finance: expenses allowable

Thank you

Dear HMRC, I am filling out my tax assessment form SA105 relating to UK property income and expenses. We recently purchased a residential property to rent out with a buy to let mortgage on an interest only basis and incurred mortgage arrangement product fees in the tax year 2022/23. These product fees were added to the mortgage loan amount. I’m seeking confirmation as I have seen some comments on the web say mortgage arrangement fees, which are added to the mortgage, are treated as an allowable tax expense only in the tax year when the mortgage is repaid when using cash basis accounting. We are using the cash accounting basis to prepare the accounts for this tax return. Could you please confirm the mortgage arrangement product fee can be claimed in full as an allowable tax expense in 22/23, even though the arrangement product fee has been added to the mortgage? Kind regards

Hi PokemonGreats
You should claim the cost of obtaining the mortgage in the residential property finance costs (box 44 of SA109) along with the interet paid.

I converted my residential mortgage to a BTL mortgage in Oct 2022. There was a £2000 mortgage arrangement fee from the lender. My accountant says this £2000 cannot be used for the finance related charges for the first let. If the mortgage arrangement fee is for a new mortgage then you can't claim this as an expense. Only on renewal can you claim it. Please can you confirm if this is correct and the arrangement fee for the first let cannot be used as a finance related expense?

Hi PSaxena

You cannot claim expenses:
 •  any costs for the first letting or subletting of a property for more than a year                                                                                                                                                                                                                                                                                  However, the costs of getting a loan, or alternative finance to buy a residential property and any interest on such a loan or alternative finance payments can be used to calculate a reduction in your Income Tax.
Put the amount of any costs, interest and alternative finance payments in box 44 (paper) or under relief for residential finance costs (online)

Thank you

Dear HMRC, Happy New Year to you I am filling out my tax assessment form SA105 relating to UK property income and expenses. We recently purchased a residential property to rent out with a buy to let mortgage on an interest only basis. Thank you for answering my previous query regards mortgage product fees. Could you kindly clarify whether we can also treat the mortgage valuation fees, fund transfer fee and legal fees relating to the mortgage as residential property finance costs in box 44 SA105?

Hi PokemonGreats

The guidance note for the SA105 advise that "the costs of getting a loan, or alternative finance to buy a residential property and any interest on such a loan or alternative finance payments can be used to calculate a reduction in your Income Tax.  
Put the amount of any costs, interest and alternative finance payments in box 44.  Please see UK Property Notes

Thank you