Mortgage payments are tax deductible if your property is your main residence. However, if the mortgage is for a second home or the property is rented out to a 3rd party, then it is not eligible for tax relief. The tax relief that landlords of residential properties get for finance costs is being restricted. The reduction is based on the basic rate of income which is currently 20%.
A property which is classed as your main residence is one where you “the taxpayer” has been residing continuously over at least a three year period. This can also be considered if the taxpayer resides at the property from the date of ownership or the date of the completion of the works for a period of twelve months.
A mortgage is tax deductible if the entire amount is used for the purchase of a property. In some cases, some banks may also provide an additional amount for renovating the property or for purchasing furniture etc. In these cases, the mortgage would only be eligible for tax relief on the amount paid for the purchase of the property.
In addition to this, for the mortgage to be deductible in the tax return it must be for a fixed asset only. Fixed assets are those properties which cannot be moved, for example a house, building, or a piece of land. Assets which are moveable are those that are mobile, such as vehicles or caravans. In these cases, the mortgage loan would not qualify for tax relief.