Buy to Let mortgage while renovating

I have bought a house needing major renovation...12months of work and I
have taken out a normal mortgage on it with the bank ( as it is
apparently in 'habitable' condition. To avoid renting for the year, I
have also bought a flat with the intention of letting it out afterwards
in the hope of long term capital gains.
To finance this I have put down a sizeable deposit on the flat with the
remainder being financed by a buy to let mortgage. I know the banks say
you can't rent to a relative (i.e. myself), but if I keep quiet about
living there for the first year is there any way they will find out. My
voters roll address will be at the renovation property as will all
bank statements etc.
There is no worry about affording the two mortgages as the combined are
less than I pay on my current property. How does this work in relation
to the taxman?

Re: Buy to Let mortgage while renovating

Honeydipped wrote:

> To finance this I have put down a sizeable deposit on the flat with the
> remainder being financed by a buy to let mortgage. I know the banks say
> you can't rent to a relative

They do? Mine only says not to students or diplomats. Some are pickier
than others, I suppose, and some will insist you must use a rental agency,
some will want to see a copy of your tenancy agreement, etc.

> (i.e. myself),

You are not a relative, and you wouldn't be renting to yourself, you'd be
letting yourself live ther gratis.

> but if I keep quiet about
> living there for the first year is there any way they will find out.

I doubt if they'd care.

> There is no worry about affording the two mortgages as the combined are
> less than I pay on my current property. How does this work in relation
> to the taxman?

You pay income tax on your rental profits, i.e. you can deduct, inter alia,
the mortgage interest (on the loan taken to finance the purchase of the
rental property) from your rental income. If you are not actually renting
it to anyone else, you won't have any income, so your rental profits will
in fact be negative until, in due course, you do rent it out. Obviously
this means there is no tax to pay since you have no profit.

Unfortunately you can't set your rental losses against non-rental income,
you can only carry them forward to set against future rental income.

In your situation, though, your rental business is not going to be deemed
to have started until you've had your first real tenant, so your losses
will not be allowable.