What expenses can I claim as a landlord is one of the questions we get most often from our customers. If you are renting out property, whether it’s mortgaged or owned by you, and you are wondering what expenses you are allowed to deduct from your net profit in order to minimise the tax you owe HMRC, then you have come to the right place. This is a very good question and in this blog we will clarify the answer for you.
What is rental income ?
Rental income is income you make when you rent out a room in your own home, or you rent out a whole property you own or when you rent a furnished property as a holiday let.
There are slightly different rules depending on whether you rent out a room in your home or whether you rent out a property as a whole (for example you rent out a flat you do not live in).
What expenses can I claim as landlord ?
As a rule of thumb, you can claim any expenditure that you incurred for the sole purpose of maintaining and running the rental property. The following are allowable expenses that you can claim for the purpose of minimising the amount of tax you owe HMRC:
1. Repairs and maintenance works on the rented property
Repairs and maintenance work carried out on the property can be claimed provided that it is not a capital improvement. How can you know whether it is a capital improvement or not?
All work implying major changes to the property such as installing a new bathroom or a new kitchen or expanding the livable area by building a whole new wing or new room is not an expanse you can claim, because these are considered capital expenses and are treated differently by HMRC with respect to the value of the property should you resell it, etc.
However, you can claim fair repair and upkeep works such as repairing water leaks, heating problems, sewage blockages, broken windows and the likes. You can also claim the annual gas safety certificate as well as the electrical condition report.
In case the property you are letting is furnished, your cannot claim repairs to the furnishings.
Also, in case you lived in the property and carried works on it in order to let it, then you cannot claim these repairs either, because they are considered by HMRC as repairs done while you were living in the property.
2. Insurance costs
As a landlord, you are required by law to insure the property you are letting. The good news is that the premium for the buildings and/or contents can be claimed as allowable expenditure.
Any service charges at your rental property, such as electricity for common access areas, can be claimed as rental property expenses.For a furnished holiday rental, since you are paying all utility charges (electricity, gas, water, TV license), then these are allowable and can be claimed.
4. Management, legal and accountancy services fees
You cannot claim any legal fees in connection with the purchase of the property or any fees for the initial lease if this is for more than one year, because they are treated as part of the purchase price.
However, any legal fees in connection with the renewal of a lease, a shorthold tenancy of less than 1 year, eviction of clients, rent collection or management fees as well as accountancy fees are all allowable and be set against the tax.
5. Rent, council tax and rates
If your rental property is a flat, then you may have ground rent to pay, which can be claimed. Ground rent is an amount paid for the land the block of flats is built on.
While your tenant will usually pay for rates and council tax, in case you pay for these, then you can set these against the tax, as they are an allowable expenditure for landlords.
If the property you are letting is vacant for a few months while you find a new tenant, you can set rates and council tax against your tax.
These mostly refer to workers that regularly come to do work your letting property, such as cleaners and gardeners. Please note that if these workers bring their own equipment, then they are considered by HMRC as self-employment and they will be responsible to declare and pay their taxes from the earnings they receive from you. But if you provide their equipment, then you are responsible to pay their taxes through PAYE, because HMRC will consider them as employed by you.
7. Travel expenses
Do you travel to the property to carry out maintenance or deal with issues with the tenants? If this is the case, then you should claim the cost of travelling. Please note the property must be a reasonable distance away from your home. If the trips are genuinely for business purposes, you can claim £0.45 a mile for the first 10000 miles and £0.25 a mile thereafter. You can also include train costs, essential overnight accommodation and meals (for one person only).
8. Replacement furniture and white goods
Replacement items count towards landlord tax expenses, less any proceeds you make from disposing them or selling them on. However, these cannot be claimed for holiday lets.
What expenses are not allowed ?
The costs and expenses incurred when you buy a property are treated as part of the purchase price. This means they cannot be set against future rental income. Typical expenses (stamp duty, legal fees, surveys and auctioneer costs) should be set against future capital gains liabilities if you sell the property.
Hopefully, by now you have found some helpful answers to your question about “what expenses can I claim as a landlord ?”.
How can LAS Accounting Ltd help you ?
When it comes to navigating complex accounting areas such as taxes on rental income, you may find you want professional help. If you are still wondering “What expenses can I claim as a landlord ?” then get in touch. Spending less on tax means you have got more money to put towards your financial goals, and a financial adviser could help you put together a plan.
Now might be the ideal time to engage the services of an accountant to do all the work for you and provide you with all the tax advice you need.
Don’t hesitate to get in touch for any further enquiries at: email@example.com