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Be tax aware

September 9th 2016
By: Mary.Wilkins
Be tax aware

When you’re a buy-to-let landlord, you will be able to offset a number of ‘allowable expenses’ which you will incur when you are renting out a property, against the income tax that you will pay.  Allowable expenses do not include ‘capital expenditure’ ie the actual purchase of the property, or renovating – beyond wear and tear repairs – but there are many other expenses that are included.

The following items include some of the allowable expenses – but do check with your tax accountant for a full list and on the government website which updated as the laws change -  https://www.gov.uk/renting-out-a-property/paying-tax

Letting Agent’s fees
Legal fees for lets of one year or less – or for renewing a lease for less than 50 years
Accountant’s fees
Insurance – contents and buildings
Interest on property loans
Repairs and maintenance on the property – but not improvements
Rent, ground rent and service charges
Cleaning or gardening services you pay for
Direct costs related to letting the property – stationery, advertising, telephone calls etc

If for any reason you include the bills in the rent, then utility bills and council tax can be included.

If your property is furnished, then 10% of the net rent can be claimed, less any costs that you pay which a tenant would usually pay (for example Council tax).

You must report income from renting a property if you receive between £25,000 and £9,999 after allowable expenses, or £10,000 or more before allowable expenses.  From April next year (2017), the higher and additional rates of tax relief will be phased out and restricted to 20% for all landlords by April 2020.

Remember, if you sell your investment property and make a profit, you will need to pay Capital Gains Tax – you can find out more about that here:  https://www.gov.uk/capital-gains-tax.

Come in and talk to our experienced staff and they will be able to advise you further and answer any questions you might have.  Alternatively, give our Lettings Hub a call on 020 8687 0077 for more information.