How To Maximise Your Tax Expenses For A Rental Property

If you own a residential property that you let out, you will know only too well that you face an income tax liability on the money you earn from the letting. Significant rental income can lead to a significant tax bill.

No matter how many residential lettings you hold, they are nonetheless classed as a 'property business', therefore there is no shying away from paying tax. Although there are numerous ways in which, as a landlord, you can claim back some of these tax expenses. Here are just a few examples of ways to maximise the tax expenses for your property.

What can you offset against your tax bill?Your property portfolio may consist of a single flat or an entire street, in the eyes of HMRC the expenses you can claim for remain the same. Basically you are taxed on the money you make which is the difference between the total rental income and the expenses you incur. So what expenses can be offset against the rent?

1. Your mortgage and your insurance paymentsIf you have obtained a loan, such as a commercial mortgage, or other form of commercial property finance, for the initial purchase of the property, you can claim back the interest as an expense. Additionally, any contents insurance and building premiums can also be claimed as expenses. However, it is important to recognise that any repayments made on the capital can't be classed as an expense.

2. Water, Electricity and Gas BillsNine times out of ten, your tenants will pay the utility bills of the property, if you are a generous landlord however, or just one who likes to screw over the taxman; you claim the payment of gas, electricity, water and council tax as tax expenses (any or all of them).

3. Payments to ProfessionalsSome professional fees can be claime for for example legal fees involving renewing the lease for no more than 50 years, or for lets lasting less than 1 year. If you hire an accountant to complete your tax returns, this expense can be claimed back from HMRC also, ironically.

4. Upkeep, maintenance and repairsProperties all require regular maintenance and so you are able to claim the expenses for repairs to the house or flat. Any expense that is considered a 'repair' is permissible, but you should note that 'improvements' to a property - the addition of a conservatory, for example - are not an allowable tax expense.

5. Letting Agent's CostsMany landlords use a letting agent to manage their property and tenants. Their costs are regarded by HMRC as an allowable expense.

Other expenses you can claim for include the costs of advertising your property, any cleaning, work done on the garden and service charges or ground rent.

Completing your tax return: When you come to file your tax return, you will have to provide your total rental income and the total allowable tax expenses. If your total property income is under £68,000, you do not have to break down the income and expenses on your return. If it is over £68,000, you will have to show the income from each property separately.

About the Author

Just Commercial Mortgages is the UK's No1 site for the latest commercial mortgage rates, and commercial property finance news.

Rating: Not yet rated

Comments