In this video we talk about allowable property expenses.
Landlords, not holiday lets
This does assume you are already a landlord, and you want to know what you can claim against your rental income. What we have to say: This is not for furnished holiday lets, and it is not for rent-a-room scheme, and it’s not for commercial premises. Okay? So, having got out who it’s not for, maybe you’re still listening. So, here we go.
There is a general rule that the expenses you incur must be wholly and exclusively for the property rental business. It must not be of capital nature, no pre-rental costs of refurbishment. And the shocker now is no loan interest, that is dealt with separately in a separate video. You are still allowed to claim an element of loan interest, which might be mortgage interest or some other interest; but it doesn’t come into the main body of the calculation of your profit from rental.
Not capital spend
So, not of a capital nature, but could be converting an outbuilding into additional rental space. It could be the refurbishment of a bathroom; including a spa bath instead of a normal bath, that would be an upgrade. Again, that would be out of allowances for this, and all that’s covered by this other video. There is another video and it’s called Rental Properties Repair or Capital Spend. Have a search around for that one and you’ll find it.
What we have then is wholly and exclusively for the property rental business. So, what are your typical costs? Okay. So, we can look at your water rates, council tax, utility bills like gas, electricity, oil, et cetera. If you have a septic tank for that to be emptied, this is on the assumption that the tenants are not currently paying for it. Okay? So, if these are your costs and you’ve incurred them, they will be allowable for the property accounts.
Property insurance. So, that could be the actual building insurance. It might even be contents, but please always check it covers that you are a landlord. You might have to get specialist landlord insurances. Services that are incurred in upkeep of the property. So, you might have a cleaner that goes in once a week, once a fortnight, or even change of tenancies. You might have a gardener that goes in, et cetera, to maintain the grounds because…
Well, I don’t maintain my grounds, so it’s like I need a gardener to do it. Any rent you may pay on the property. Some people that rent property might have a split between mortgage and rental. It depends on how the property was bought. There will be rent, possibly ground rent and service charges, if you’re in a flat or a complex. Accounting fees, we have to be able to be deducted.
Letting agent management fees
If you go through a letting agent, so the management charges from a letting agent plus their VAT and anything else they might charge you should be an allowable cost. If they charge you repairs and maintenance, just be aware of; is it really a repair and maintenance or is it an upgrade of facilities? So, as I said, the upgrade stuff would be talked about in a different video. We’ve got here advertising to get a client to stay, and we’ve got also replacement of domestic items relief.
It doesn’t come in the body of the calculation for profits, but it does come as an allowance, and eventually will come off the total profit in the end. Let’s just go back and have a look quickly at repairs and maintenance. This could be a repair to water pipes, showers, et cetera, gas leaks. Repairs of electrical void, electrical faults, broken windows, gutters, roofs, internal walls, flooring, ceilings, repainting and redecoration.
Fixtures and fittings
Replacement of fixtures and fittings such as, I don’t know, a radiator or a water tank because that might’ve leaked. You might have to replace certain units in the kitchen and bathroom, but not an upgrade to the kitchen and bathroom. And things like treating damp rot or wet rot. So, that type of thing would be covered under repairs and maintenance. Now, if you’ve done all this stuff before you first let the property, it is not an allowable expense against your property income.
And that comes under the rental properties, repairs and capital spend. So, really they are your typical costs of what you would have with regards to fitting out a property and renting a property. It is possible that one year it might be between tenancies. You have a lot of repairs to do because they trashed the apartment or house. And therefore, you might have a lot of repairs that takes your property into a loss.
Losses on a property
I haven’t covered it in another video anywhere, but if you do get a loss in your property business, then that loss gets carried forward to offset against any other profits in the following years. You can’t use that loss to offset against any other income. So, hope that helps. Hope that gives you an idea of the types of expenses you can claim for your property. And any problems, please just drop us a line and we could try and help you. All right. So, thanks very much for listening. Cheers, and bye.