Allowable Expenses
28th January 2019
... Comments

The sight of Christmas decorations returning to the loft is usually a signal for landlords to start thinking about the dreaded tax returns.

Experienced landlords know that every penny counts, so that’s why they make sure they pay particular attention to calculating allowable expenses.

There are two types of expenses: revenue and capital. Revenue expenses cover the day-to-day costs of maintaining a property and can be offset against your income tax bill. Capital expenses cover major work which increases the value of the property, such as loft conversions, and cannot be offset against your income tax bill. However, you might be able to offset capital expenses against capital gains tax.

The important thing to remember is that any costs which are vital to you fulfilling your duties as a landlord should be offset against any rental income, which will lower your tax liability. 

Allowable expenses can include:

  • professional fees (letting agents, legal, accountants etc)
  • property services (cleaning, plumbing, gardening etc)
  • insurance
  • interest on property loans
  • maintenance and repair costs
  • utility and council tax bills
  • rent, ground rent and service charges
  • direct costs (phone calls, marketing etc)
  • mileage to the property
  • training courses
  • mortgage interest (you cannot claim the full amount of your mortgage payment, only the interest).

HMRC definitions on capital and revenue expenses are not always obvious. For example, a double-glazed window could be viewed as a capital asset, but it is actually classed as a repair to the property so is an allowable expense.

Some major repair work can also be deemed allowable by the HMRC. If you decide to rip out a fitted kitchen in your rental property and replace it with a similar sized kitchen, then all the relevant costs can be an allowable repair expense. The property is viewed as the asset and the kitchen is a subsidiary part.

Furthermore, since April 2016, the old 10% Wear and Tear Allowance for furnished rental properties was replaced by the new Replacement Relief. This means landlords can now deduct the actual cost of replacing furniture and furnishings, rather than simply claiming a flat rate.

If you are intending to become a buy-to-let landlord, you can request a free, no obligation chat with Knight Property Management. Call us today on 01992 308181. 

About the Author

Jan and David

Member since: 22nd April 2012

Award-winning letting agents and chartered surveyors regulated by RICS and ARLA.

Popular Categories