Over approximately 5 million rental properties in the UK, landlords are always seeking the most tax-efficient ways to manage expenses for maximum profit. Whilst HMRC has become stricter with expenses for landlords; there are still ways that you can claim for different areas of a rental property!
This blog will briefly outline some of the expenses that you are eligible to claim as a landlord.
For more information on your property, it is always best to seek professional advice, so feel free to get in contact with us!
Repairs and Replacements
As a landlord, you are responsible for ensuring your rental property remains in good working condition for your tenants. You can’t claim tax relief on the actual cost of kitting out a property for the first time with furniture or appliances. It can only apply when an item is replaced.
The cost of redecoration or repairs to a property can be an allowable expense as long as it’s a like-for-like repair or replacement. You can’t, for example, claim for replacing a laminate kitchen worktop with a granite worktop.
This can also include furniture and furnishings so long as:
- They were part of the property when it was let out.
- An expense was incurred to replace them.
- The new item is solely for the use of the tenants.
- The old item is no longer available to purchase.
- The replacement is on a like for like basis.
If you want to replace an old item with a newer item, you can still claim a partial expense. For example, you bought a new sofa worth £600, but the cost of replacing your old sofa with a very similar one was only £400, you’d only be able to claim £400 relief.
Letting Agent Fees
Paying for professional services is classed as an allowable expense so letting fees are tax deductible!
This also includes fees incurred if you choose to have your property fully managed by an agent.
Mortgage interest treatment
Landlords with buy-to-let properties are entitled to a 20% tax credit on their mortgage interest payments. This means that for every £9,000 spent on mortgage interest, a landlord can claim £1,800 back in tax relief.
This is less generous than the old system for higher-rate taxpayers.
Insurance
There are certain insurance premiums that can be claimed as deductions from your rental income.
- Buildings Insurance – This covers the structure of a rental property, including the roof, walls, and permanent fixtures. The premiums paid for building insurance on your rental property are fully tax deductible when filing your tax return.
- Content Insurance – This covers the contents of a house such as furniture and décor. On a furnished property these are tax deductible, however for an unfurnished property this insurance cannot be claimed.
- Landlord Insurance – This form of insurance protects you as a landlord should your tenants fail to pay their rent. Your annual landlord insurance policy can be deducted from your taxable rental income.
Advertising
Advertising is necessary to generate rental income and for this reason, advertising expenses can be tax deductible in some circumstances. For example, listings on websites or with real estate agents can be classed as administrative expenses.
It is important to keep a record of receipts and other documents to verify the costs of these tax-deductible expenses. This will also be helpful for your accountant.
Travel
Travelling to a property to carry out maintenance classes as an expense. You are eligible to claim Mileage Allowance Payments which means you can claim money per mile you travel. Property owners who travel by car can claim the authorised mileage rates: 45p per mile for the first 10,000 business miles in a tax year and 25p per mile for each extra business mile.
Hotel stays can also be deducted if you have to stay overnight to deal with emergencies or repairs. To qualify as a valid expense, the primary purpose of your trip must be to manage your rental property; personal travel expenses are not tax deductible.
The list of rental income expenses is not exhaustive, so make sure to explore every avenue when it comes to profitability as a landlord. You don’t have to do this alone however, – we are here to help! If you would like more information or advice please get in contact with us – info@future-cloud.co.uk!
