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  • Tax

    Allowable expenses

    Morning all,

    How do people calculate non-specific expenses such as phone, home office costs and stationary for self assessment? I have two BTL's in personal name but have never claimed anything for these expenses.

    Also, is there a similar method for such expenses claimed against property held in SPV Ltd company?

    Thanks in advance.

    Lee

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    Hi Lee,

    Your accountant will guide you on claiming a "reasonable" proportion of those costs.  You should try and be as accurate as possible so that, should you become subject to an audit by HMRC, you would be able to demonstrate that you have not taken the mickey.  

    As your accounts go in year on year, HMRC's super-computer will be looking for any discrepancies, so keep it within reasonable parameters.

    See - How to avoid a tax investigation by HMRC 

    Keep copies of all receipts just in case they are needed.

    Further reading: Resources for reducing landlord tax liability

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    I think my accountant allows 10% of  my normal average  home expenses

    This i guess would vary though on how big ones business is and if you self managed or used an LA

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    Jonathan Clarke. http://www.buytoletmk.com


    Any minor claim for use of home £4 a week without justification is automatically accepted by HMRC.

    BIM 47800-4825 clearly lay out that you can charge your home office expenses proportionately and reflective to your actual usage.

    You add up the amount of rooms  (living and Bedrooms not WC and Kitchen), I have 6. Then if you use one room as an office you work out what % of time you use that room for work and how much for other things.

    I have a room converted to an office I use it 90% for my rental and 10% for other things.

    Therefore I can charge gas, insurance, maintenance, council tax etc to the business at 15%, ie 90% of 1/6th of bills. Be wary of charging a room 100% for work use, always only claim a % else HMRC can make a claim for CGT when you sell but only if you fully appropriate a room solely for work.

    Home broadband you allocate and charge by rough % used for work same as a mobile. For capital costs around the home I feel it sensible to allocate %wise i.e. I work from home and have a computer I use well because it is at home it probably also gets used for some non work things so I allocate % in capital account.

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    Many thanks as usual for all comments.

    The accountant I used previously was simply performing an administrative function of inputting the numbers I was giving him and offering no advice around this topic, therefore I decided last year to complete the self assessment myself as it is relatively simple for my personal affairs.

    Fedup Landlord - Do you have any HMRC reference to the automatic allowance of £4 per week please?


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    I got it wrong, sorry quoting from memory but it is £2. Get yourself a copy of "how to save property tax" by Carl Bayley. It is brilliant and simple

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    I've read quite a number of Tax books but I recently read an excellent article on Home expenses  ( similar to fed-up landlords comments, but in more detail !

    It was in the May 2017 edition of ' Business Tax Insider.co.uk ' by  Lee Sharpe.   entitled  " Use of Hiome as Office : Is HMRC Short-Changing Taxpayers "

    To which the answer is a resounding YES.   Far more than the  £4 since  2012-13 weekly allowance  can be claimed.

    One of the best Tax books I've read is by the same Tax group - Property Tax Portal. - How to Avoid Landlord Taxes ( title changes slightly each year ) by Arthur Weller and Amer Siddiq.

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    Free Spreadsheet Download - Allowable costs post  budget announcement

    Video demo: 

    Download spreadsheet: https://www.optimiseaccountants.co.uk/all...dOUTUyZNAY

    What costs can you offset against your property income. The above article discusses the three R:

     - Repairs
     - Replacement
     - Renewals

    We wished we could take the credit for the genius marketing but sadly we are unable to. The three R's in principle are costs that may be offset against property income and reduce the tax of the property investor.

    It is therefore important for you to mange your suppliers to ensure that invoices says "installation of a replacement kitchen" which is allowable costs against the property income rather than "installation of a new kitchen" which is not allowable and will be deemed by HMRC as a capital costs

    The article below discusses the use of capital allowances on certain property investments such as holiday lets and HMOs. The interesting thing about capital allowances is the fact that it is possible for you claim back any tax paid on your employment if losses are made.

    Article: https://www.optimiseaccountants.co.uk/cha...dOVdEyZNAY

    The final article in this suite is all about holiday lets. Provided that the investment meets the HMRC criteria for it to be defined as a holiday let then capital allowances may be claimed. This article looks as the type of costs that fit into the capital allowances bracket.

    Of course there are additional tax benefits to holiday lets including: Holdover relief on sale of the property, hold over relief in the event of your death to mitigate IHT, the profits from holiday lets are taken into account when looking at your pension contributions allowances plus many many more

    Article: https://www.optimiseaccountants.co.uk/are...dOVfUyZNAY

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    Simon Misiewicz | Business Development Manager

    Optimise Accountants

    Telephone: 0115 939 4606

    website: http://www.optimiseaccountants.co.uk