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  • Tax

    Landlords' A - Z of property tax expenses - Video Guides

    The expenses that landlords can claim against tax is an ever-green topic.

    Property Tribes is delighted to join with our tax partner, Rental Income Tax Advisors (RITA), to present an A - Z of expenses that landlords can claim for.

    Michael Wright of RITA joined me to launch the guide:





    Depending on how you like to absorb information, there is a text version and a video version.

    A is for Advertising

    If you advertise when you are seeking for new tenants the cost can be claimed as an expense against your rental income. This may be via an online agency, or a high street letting agent. Be sure to keep your receipts should these be requested by HMRC in the future.





    B is for Bank Charges

    If you have a dedicated bank account related to your property business and incur bank charges from it, you may be able to claim this as a deduction against your rental income.





    C is for Cleaning

    The cost of cleaning services you incur for your property is eligible for tax relief. This is most likely to be when a tenant moves out or a new tenant moves in. It may also be a cost incurred on an ongoing basis throughout the tenancy.





    D is for Debt Collection

    Every landlord’s worst nightmare is having a tenant who leaves with owing rent in arrears and not being able to recover it. Well the good news is that the legal costs in recovering the debt is usually an allowable tax deduction.





    E is for Electrical Safety

    Electrical safety certificates, and in fact any safety certificate relating to your rental property are usually tax deductible. Electric and Gas Safety and EPC's are perhaps the most common.






    F is for Fees incurred in obtaining finance

    One expense that is often missed is the cost of obtaining finance (usually a mortgage) to fund your rental property. Mortgage arrangement fees are often quite high, so this is a potentially big omission. Other fees may include Mortgage Broker Fees. Please bear in mind that the recent summer 2015 Budget means that these will begin to be restricted from April 2017 onwards.






    G is for Ground Rent

    Ground rent is charged on leasehold properties. Do keep the relevant receipts here, as you should be able to claim this cost against your rental income on your self assessment tax return.






    H is for Hotels and Subsistence

    If you incur hotel and subsistence costs when travelling to your investment property, then these may be claimable against your rental income, reducing the amount of tax you owe. Please note, the journey must be wholly and exclusively for the purposes of the rented property, and cannot be combined with any personal matters.






    I is for Insurance

    As a landlord, you will be faced with numerous insurance costs. These are usually claimable against your rental income, and therefore will reduce your tax bill. Typical examples include building insurance, contents insurance, rent protection and boiler cover insurance.






    J is for Justifiable

    It is very important when completing your self assessment tax return, to ensure you keep all your property receipts, as well as any other supporting evidence, such as a P60 for your employment and so forth. Should you be investigated by HM Revenue and Customs (HMRC), this will make life a lot easier, and will reduce problems for you in the future.






    K is for Keeping Receipts

    Similarly to J is for Justifiable, it is extremely important to keep receipts not just in the eventuality a tax investigation occurs, but also, as there may be past costs which may be claimable against your capital gain when selling the property. These may substantially reduce your tax bill, and therefore, keeping receipts is vital.






    L is for Letting Agents

    Landlords often use a letting agent for finding new tenants or managing their properties. In either case the fees are tax deductible. Again, please ensure you keep the statements provided to you.






    L is also for landlord licensing - you can deduct the cost of purchasing a landlord licence.

    M is for Mortgage Interest

    Mortgage interest is claimable against your rental income as an allowable deduction, reducing your tax bill. Other costs of obtaining finance may also be allowable, such as arrangement fees and mortgage broker fees. Only the interest element of any of mortgage repayments can be deducted for tax purposes where there are capital repayments. Please note, the Summer 2015 Budget included an announcement that mortgage interest will be restricted in stages, from April 2017 onwards.






    N is for New Tenancy Expenses

    As a landlord, you will no doubt face expenses when there is a new tenancy agreement. A typical example is inventory costs. These may be claimable against your rental income, and it is important to ensure you keep the relevant documents to support your claim.






    O is for Office Expenses and Equipment

    As a self managed landlord, your will likely incur office expenses. Typical examples are stationery, computer costs and postage. They may be claimable against your rental income, and therefore, please ensure you keep the relevant receipts to validate your claim.






    P is for Professional Fees

    Certain professional fees such as those paid to your tax advisor for completing your self assessment tax return, may be claimed against your rental income. As well as benefiting from your advisor, this will also reduce your profits exposed to tax, therefore reducing your bill.






    Q is Question of a Ship or a Cinema?!

    These are two old legal cases that determine whether or not you can claim initial repair expenses. In the case of the ship it was unseaworthy without repairs and, therefore, the repairs were not an allowable deduction. The reduction in the price when the ship was purchased also reflected the repairs that would need to be made. The Cinema was also in a poor state of repair, but was usable prior to the repairs taking place. The repairs by the cinema are therefore allowable for tax purposes. The question for landlords is: was the property fit to be let out when it was first purchased? Or to rephrase it, are you a ship or a cinema?






    R is for Repairs

    Repair costs are usually claimable against your rental income as an allowable deduction. This area does however cause confusion, as you need to ensure the cost can be classed as a repair, and be certain it would not be classed by HMRC as a capital improvement. If the cost is deemed to be a repair, then this may be claimable against your rental income, whereas if it is a capital improvement, the cost would instead be retained for future use against a potential capital gain on sale of the property.






    S is for Subscriptions and Course Fees

    As a landlord if you incur relevant subscription costs and course fees, these may be an allowable deduction against your rental income. The key here, is that it should reinforce your existing knowledge as a property investor and landlord.






    T is for Travel Costs

    If you are visiting your property, and your incur travel costs, then these may be claimable against your rental income. This could include train tickets, mileage costs and similar. Please note, that if a letting agent manages the property, this is deemed to be the office, and therefore, the journey point should start there.






    U is for Utilities and Council Tax

    If you incur utility costs and council tax, then these may be claimable against your rental income. Please be careful if you are claiming wear and tear allowance, as these may form part of the calculation in ascertaining your net rental income received, which is exposed to the 10% rate. In addition, note that wear and tear allowance will be abolished in April 2016, to be followed by a new system whereby the actual replacement cost of furnishings may be claimed.






    V is for Vehicle and Mileage Costs

    Vehicle mileage is an expense which may be claimed against your rental income. It is recommended to keep a mileage log, which should include the date of the journey, the reason for the trip, the number of miles, and where the journey started and ended. Mileage is paid at the rate of 45p per mile for the first 10,000 miles, and 25p for each additional mile above this threshold.






    W is for Wear and Tear Allowance

    If you provide adequate furnishings for your tenant to live in the rental property without the tenant having to provide furnishings you can claim wear and tear allowance which is 10% of the “net rent.” Please note however, this is due to be abolished in April 2016, to be followed by a system whereby the replacement cost of furnishings may be claimed.






    X is for Xerox and other Stationery costs

    As a landlord, you may be faced with numerous stationery costs, which are required as part of your letting activities. This may include paper, printer ink, and so forth. These may be allowable costs against your rental, so do retain your receipts should these be requested at a later date.






    Y is for Your Business Related Telephone Expenses

    As a landlord, you may be faced with regular telephone costs, which may be claimable against your rental income. This includes not just telephone calls to your tenants but the cost of any other phone calls that are related to your property business including to your letting agent and potentially to your bank.






    Z is for Zapping Your Tax Bill

    RITA4Rent are here to help zap your tax bills! Working with specialist property tax advisors can really pay dividends. The value in the service, and tax savings, is of greater interest to our clients than the fees we charge. RITA4Rent are specialists in property tax, dealing solely with landlords. If you require any assistance, please do not hesitate to contact RITA on 0800 1 22 33 57 or by visiting our website.






    RITA4Rent are the sole recommended tax advisors of the Residential Landlords Association, who represent over 20,000 property landlords, and we are also tax partners of the Property Tribes.

    You can find RITA's tax record-keeping spreadsheet >>> here.
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    Wow! Thanks so much. Super useful.
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    Very useful. Thank you.
    Just wanted to rant about B&Q and their really poor quality receipts that seem to fade over a matter of mere months. No hope of reclaiming capital improvements from all the old receipts I've kept. Now at last, they have created a system with B&Q Club (no I do not work for them) card which records all your expenditure electronically.
    regards

    Very useful. Thank you.
    Just wanted to rant about B&Q and their really poor quality receipts that seem to fade over a matter of mere months. No hope of reclaiming capital improvements from all the old receipts I've kept. Now at last, they have created a system with B&Q Club (no I do not work for them) card which records all your expenditure electronically.
    regards
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    This is extremely useful! Thank you

    Just to clarify Michael about the finance costs.
    Are both the mortgage broker's fees and the btl product initial arrangement fee (that can be as high as £2K) both allowable expenses?
    And if the btl product fee is added to the loan, do we deduct the full amount AND the monthly interest only payment?
    If not, how will we separate the interest due to the mortgage arrangement fee (still allowable expense) from the interest due to the property loan (deductible only at 20% should the new changes go ahead) HuhHuh

    Complicated I think... Dodgy[/u]
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    Thank you for your kind comments! Smile

    If you are charged an arrangement fee or mortgage broker fee on your buy-to-let mortgage, then you may claim these as costs relating to obtaining finance. The arrangement fee you highlight, may be claimed in the year it is incurred, with your mortgage interest claimed in future years as usual.

    However, please note that the Budget announcements recently do not mean that just mortgage interest is being restricted, but also these costs of obtaining finance mentioned above.

    Hope that helps!

    Best wishes,

    RITA4Rent
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    RITA4Rent (Rental Income Tax Advisors)

    Specialists in Landlord Taxation

    Recommended tax advisors of the Residential Landlords Association

    Follow us on Twitter @Rita4Rent

    clients (at) rita4rent (dot) co (dot) uk

    http://www.rita4rent.co.uk


    (17-09-2015 02:30 PM)Rita4Rent Wrote:  Thank you for your kind comments! Smile

    If you are charged an arrangement fee or mortgage broker fee on your buy-to-let mortgage, then you may claim these as costs relating to obtaining finance. The arrangement fee you highlight, may be claimed in the year it is incurred, with your mortgage interest claimed in future years as usual.

    However, please note that the Budget announcements recently do not mean that just mortgage interest is being restricted, but also these costs of obtaining finance mentioned above.

    Hope that helps!

    Best wishes,

    RITA4Rent

    Thank you very much indeed for the quick reply Smile
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    (17-09-2015 02:35 PM)MNL Wrote:  
    (17-09-2015 02:30 PM)Rita4Rent Wrote:  Thank you for your kind comments! Smile

    If you are charged an arrangement fee or mortgage broker fee on your buy-to-let mortgage, then you may claim these as costs relating to obtaining finance. The arrangement fee you highlight, may be claimed in the year it is incurred, with your mortgage interest claimed in future years as usual.

    However, please note that the Budget announcements recently do not mean that just mortgage interest is being restricted, but also these costs of obtaining finance mentioned above.

    Hope that helps!

    Best wishes,

    RITA4Rent

    Thank you very much indeed for the quick reply Smile

    I thought the mortgage arrangement fee had to be ammortised over the life of the mortgage deal, was I always wrong or have things changed?e
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    (17-09-2015 02:30 PM)Rita4Rent Wrote:  Thank you for your kind comments! Smile

    If you are charged an arrangement fee or mortgage broker fee on your buy-to-let mortgage, then you may claim these as costs relating to obtaining finance. The arrangement fee you highlight, may be claimed in the year it is incurred, with your mortgage interest claimed in future years as usual.

    However, please note that the Budget announcements recently do not mean that just mortgage interest is being restricted, but also these costs of obtaining finance mentioned above.

    Hope that helps!

    Best wishes,

    RITA4Rent

    I thought the mortgage arrangement fee had to be ammortised over the life of the mortgage deal, was I always wrong or have things changed?
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    Would I be right in saying arrangement fee is tax deductible, but solicitors fees etc are treated as capital expense?
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    Luke Marchbanks
    Belvoir Bournemouth

    M:079790123970 E:luke.marchbanks@belvoir.co.uk W:http://www.belvoir.co.uk

    (17-09-2015 04:35 PM)Luke Marchbanks Wrote:  Would I be right in saying arrangement fee is tax deductible, but solicitors fees etc are treated as capital expense?

    My understanding is that, on a purchase mortgage, if the solicitor separates out the part of their fee incurred in dealing with the lender, you could claim that part against rental income. If it's a remortgage, the whole of their fees would be associated with obtaining finance and thus wholly claimable.
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    Hi Dominic

    There is no need to spread it over the life of the mortgage, and it may be claimed as incurred. That said, you could amortise it if this was your wish, but bear in mind the Budget announcements of restricting finance costs from April 2017 onwards. Claiming at the date of incurring, will of course bring an excellent immediate tax benefit.

    Hope that helps and best wishes,

    RITA4Rent
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    RITA4Rent (Rental Income Tax Advisors)

    Specialists in Landlord Taxation

    Recommended tax advisors of the Residential Landlords Association

    Follow us on Twitter @Rita4Rent

    clients (at) rita4rent (dot) co (dot) uk

    http://www.rita4rent.co.uk