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I've got a lot of questions.. I have several BTL, and one residential home with some lodgers. Trying to understand what are allowable expenses.
If I am a BTL "investor" can I still put down all professional fees and costs associated with a BTL purchase? (I had read somewhere that because I wasn't a "trader" I couldn't). I would put down Broker Fee, Solicitor fee, valuation fee. Also all maintenance (no improvements) around £4k for decorating and renewing bathroom etc.
I understand the refinancing of my residential home, and another BTL as they also had fees, can also be put down as expense on my new BTL purchase. (even the bank arrangement fee, which was added to the loan)
Also, as I have lodgers - can I claim expenses for renewing the bed and wardrobe etc? How about for kitting out an empty room with bed and wardrobe?
Thank you for any tips!
I can only answer regarding lodgers. You can claim expenses as described OR you can claim the £7500 rent a room income tax relief. You can't claim both.
Many thanks for your reply.
So repairs are expenses. How about kitting out furniture in an empty room to get it ready for a lodger?
Furnishing an empty room would be an improvement, not an expense. Read the following links for guidance.
Thank you for your message. There is quite a lot to this question, and in the avoidance of doubt, tax advice would be recommended.
Timing is going to be quite important here, as you have not mentioned when these costs were incurred in purchasing a BTL property. If the costs were incurred prior to 5th April 2017, then you would be using the old rules, whereas post 5th April 2017, you would be exposed to the new Section 24 phase in.
Under the old rules (prior to 5th April 2017), costs such as arrangements fees, broker fees, and mortgage interest, would be claimable. But under the new rules, the treatment is very different as per the much publicised Section 24 rules.
However, despite the changes, valuation fees and solicitors fees that you mention will continue to be treated as purchase costs as opposed to finance costs, and claimable when selling an investment property, reducing a potential capital gain. Remortgages can attract different rules again, and timing is also important here.
Genuine revenue repairs would be an allowable expense, but great care must be taken to ensure there is improvement element. If costs are classified as improvements, then these would be retained for future use against a potential capital gain. If repair costs are incurred prior to the first let, then care should also be taken that they have not been incurred to make a property safe and habitable, as you would again likely see these retained for the future against a capital gain.
There is a lot to consider here, and as stated, if you are unsure, I would recommend you seek professional property tax advice.
Hope that helps and best wishes,
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
Many thanks for your reply RITA4Rent
I've bought a few, but all before Apr 2017Yes, I do have a tax accountant, but wanted to understand and double check myself as I found a few differences.
I'd like to undertand the difference between "trader" and "investor" which one am I? With BTL in personal name. And then I thought it was only "trader" that was allowed these professional fees as expenses.
Thank you, Jonny
Hoped you would reply. I also emailed, but didn't get a reply.
We're seeking a UK property accountant.
From what you are saying, it would appear you are a property investor rather than a trader. Nevertheless, we can certainly discuss this in greater detail.
I have checked our system, but your message may well have been caught by our spam filers. When was this sent?
Do feel free to send me a message direct at michael (dot) wright (at) rita4rent (dot) co (dot) uk
Kind regards, Michael Wright ( RITA4Rent )
Thank you, I'll send a quick email
Hi Michael, I emailed on 31 July, but didn't hear back from you. Did you get it? I wonder if it is in your spam folder? could you search for jguk.org please
It's ok, found it! Thank you for your reply