What are the Allowable Expenses for Private Residential Landlords
Renting out a property can be costly due to various expenses, including repairs and maintenance, which can reduce rental profits. However, landlords can claim allowable expenses to lower their tax bill.
When it comes to managing your finances as a landlord, there are several important aspects to consider when filing your your self-assessment, such as picking a software or accountant, collating your rental income statements and in particular, analysing your expenses and what you can claim on the SA105 Rental Income pages.
Understanding these key elements can help you navigate the complexities of the tax system and ensure that you are maximising your deductions while remaining compliant with HMRC.
12 Allowable Expenses for Landlords
Here is the list of some of the most common deductions that landlords can use to reduce their overall tax bill:
1. Mortgage Interest
Interest on loans taken to buy the rental property. The mortgage arrangement fee is also considered a finance cost. Although, these costs are not fully deductible from rental profits, only a 20% tax credit is provided. If you're a higher rate tax payer, you may feel the hit here.
2. Repairs & Maintenance
Costs for fixing or maintaining the property, such as plumbing repairs, repainting, and fixing roofs. This also includes maintenance such as obtaining gas safety certificates.
Note: Only like-for-like replacements are eligible for reimbursement; the value cannot be higher. For instance, if you install a shower that costs twice as much as the market value of the shower you removed, you may only deduct half of the expenditures from your permitted expenses. Renovations and improvements are seen as capital in nature and can be deducted from a future capital gain on sale of the property.
3. Property Management Fees
Fees paid to property management companies for managing the property. You can also pay yourself a management fee if you have set up your rental property business in this way.
4. Council Tax and Utility Bills
Payments for council tax, water, gas, electricity, and other utilities, if paid by the landlord. Generally this might be between tenancies. If you, the landlord moves to the property then this would not be allowable.
5. Landlord Insurance
Premiums for policies covering buildings, contents, and landlord liability.
6. Legal and Professional Fees
Costs for professional services like letting agent fees, accountant fees, and legal fees for evicting tenants. The cost of filing with software, like Taxd is allowable.
Note: Although HMRC may request to view your invoices as proof during an audit, you are not required to provide these with your tax return.
7. Service Charges and Ground Rents
Charges for the maintenance of communal areas and ground rent for leasehold properties.
8. Advertising Costs
Expenses for advertising the rental property to potential tenants.
9. Administrative Costs
Office supplies, phone calls, and other administrative tasks related to managing the property.
10. Gardening and Cleaning Fees
Regular gardening expenses and end-of-tenancy cleaning costs are legitimate expenses that can be claimed as deductions.
11. Travel Expenses
Costs for travel related to managing the rental property, such as visiting the property or meeting with tenants.
12. Landlord Association Subscriptions
UK landlords are represented by a number of regional and national groups, which you may join to get several advantages. Your subscriptions are deductible as a legitimate cost.
Final Thoughts
As a private residential landlord, understanding and claiming allowable expenses is crucial for minimising your tax liability and maximising your rental income. UK self-assessments are complicated, especially for landlords claiming acceptable costs. An online tax software like Taxd can help you maximise deductions and comply with tax laws.
Remember, you need to file the SA105 Rental Income supplementary page of the tax return to claim expenses. You can lower your taxable income by ensuring you have covered all allowable expenses.
FAQs
1. What are some allowable expenses for private residential landlords?
There are many allowable expenses for landlords, including repairs and maintenance, gardening and cleaning fees, agent fees, legal costs, insurance, utilities, council tax, and advertising for new tenants.
2. How should I keep track of expenses?
Keep track of expenses on a spreadsheet, or by using a separate card (bank statement) for your rental business. You can also use software like Taxd to track and store expenses.
**3. What is the minimum amount of expenses I can claim?
If you claim under £1,000 expenses, it's often more tax-efficient to claim the Landlord allowance of £1,000 - we will automatically apply this for you if it applies to you.
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