Running any kind of business has associated costs and being a landlord is no different. There are, however, several different expenses and allowances that a landlord can claim to offset some of the costs that are incurred. In this guide we will take a look at what expenses a Landlord can claim tax relief against.
The first thing to take into account is that, as a landlord, you need to start logging all your expenses from the moment you start buying a new property as some of the purchase costs can ultimately be offset and reclaimed. The second thing is that not all expenses qualify for tax relief, some can only be claimed when selling the property, some can be used against annual tax bills and some have specific rules associated with them which means it is 50:50 whether they can be claimed. In all instances it is advisable to seek professional advice from a qualified accountant.
Buying a property
When you buy a property, you should keep a record of associated costs such as solicitors fees and stamp duty payments as these can be offset when you eventually sell the property against the capital gains tax you might need to pay. Make sure to keep lists of and receipts for all the costs incurred. Remember that this is a long term offset so will only be beneficial when you finally sell the rental property.
Upgrading a property
If you make alterations to the property of a capital nature such as an extension or major refurbishments, you can also offset these against any future capital gains tax liability. Such things could be from installing a new security system or installing an upgraded kitchen. Again, these cannot be offset against normal income tax and will only be a benefit when finally selling the property. Receipts will be needed.
Financial costs and professional services
If you have a mortgage on a property you are renting out, you can claim tax relief on the interest payments. Any legal and admin fees associated with renewing a contract which has an initial lease of less than 1 year can be claimed back against tax as can building and contents insurance. Additionally, agent fees, accountant fees, cleaners, gardeners and any other professional services used for your rental property can also be offset as a legitimate cost of running your business.
Costs incurred whilst a property is empty
Expenses incurred whilst the property is empty such as utility bills, water and council tax can all be claimed back against your tax liability.
Administration and travel costs
In the course of running your business the everyday costs like phone, broadband, postage and advertising and marketing fees can all be claimed. If you need to travel to conduct viewings, inspections etc then you can claim back these costs too. Check with your accountant for the rules around claiming for fuel, car insurance, maintenance of the vehicle, insurance etc as only a percentage maybe reclaimed if the vehicle is also used for personal use.
Repairs, maintenance and replacements
If you need to replace what are called Domestic items, you can claim relief on those replacements on a like for like basis. Such items are beds, carpets, crockery, curtains, sofas and white goods for example. You can only claim for the amount that the original item cost so if you buy a £600 sofa to replace one that cost you £400 originally, you can only claim £400. Maintenance costs can be claimed as long as they are not classed as improvements.
The main thing to remember is that any cost claimed has to have been incurred wholly and exclusively as a result of being a landlord and servicing that rental. We would always recommend discussing any allowances with your accountant to make sure that you are only claiming for costs that are allowed.
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