My client has income from rental property. He is currently looking to apply for a mortgage. The new rules regarding mortgage interest means that his taxable profit is calculated before deducting the mortgage interest so this equates to taxable income of £60,000 on his SA302. As you know the mortgage interest is now deducted as a "tax reducer" lower down the tax computation. In his case this is £20,000.
When he applies for his mortgage I would like to know whether the underwritters would use the taxable figure of £60k on his SA302 as his income or would they take into consideration the mortgage interest amount of £20k hence calculate income for mortgage purpooses as £40k.
I have asked two mortgage advisors this question and they said it's up to the underwritters to decide....I can't believe I've not already bumped into this issue before. Has anyone else?