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You may be a landlord and may have been one for a while but if you do not file your own tax return you may not know the types of expenses that are allowable, so we have written this article just for you.
On 6 April 2017, Landlord tax changes to allowable expenses came into effect. Let’s take a look at what those changes mean and how they affect you.
Landlords pay tax on the profit made by renting your property, which is calculated by subtracting ‘allowable expenses’ from your rental income.
Should you own multiple rental properties, you’ll treat your portfolio as one single business, grouping all your rental income and allowable expenses together.
First off, we’ll explore allowable expenses – what are they?
Some examples:
⦁ The cost of general maintenance and repair
⦁ Bills (if paid by you, the landlord): electricity, gas, water, council tax
⦁ Buildings and contents insurance
⦁ Services, ground rent, cleaners
⦁ Property management or agency fees
There are other costs which aren’t allowable:
⦁ Mortgage interest payments. From 2017, you get a reduced rate of relief on these payments.
⦁ Mortgage repayment capital
⦁ Items for personal entertainment or enjoyment
Making enhancements to provide a long-term benefit to your property, such as improvements, furnishings and equipment, are considered capital expenses and can’t usually be taken from your rental income.
In some cases, you might be able to claim Replacement of Domestic Items relief, which replaced the Wear and Tear allowance in April 2016.
For example, to replace:
⦁ Moveable furniture such as wardrobes, beds
⦁ Curtains, carpets or other furnishings
⦁ Appliances i.e. washing machines
⦁ Kitchenware
There are certain constraints here. An expense must have occurred in order to replace the domestic item, the previous item must no longer be available to use and the new item must be for the sole use of the tenants at the property.
In these cases, it doesn’t matter whether you’re renting out an unfurnished, part furnished or fully furnished property.
If you’ve upgraded a previous item, you can only claim for the cost of item you’ve replaced.
Miss. Claire White
W. Why Media
E. claire@whymedia.com