There is a lot of confusion over what you can and can’t claim against your income on a buy to let rental property, so we’ve prepared a quick guide to help you:-
There have been some changes to this in the last couple of years and something that HMRC are phasing out by 2020. This is really important as it could have a serious impact on small investors who have mortgages on their rental properties.
For the tax year 2017/2018 you can claim 75% of the mortgage interest against your property income, assuming that it is residential. This reduces to 50% for the 2018/2019 tax year, to 25% for the 2019/2020 tax year and after this you will not be able to claim it at all.
You can reclaim mortgage and broker fees in the year in which they are incurred
Letting Agent Fees
You can claim the cost of hiring a letting agent to look after the property for you, these are normally between 10% and 15% of your monthly rental income.
Securing a Tenant
You are able to claim back the cost of advertising for new tenants, purchasing a tenancy agreement, arranging credit checks and reference, deposit protection fees and inventory costs from a professional.
Buildings & Contents Insurance
When renting out a property you should ensure that you have specialist landlords insurance which will cover loss of rent, the building and your liability as a landlord. You should also consider whether you need contents insurance.
Maintenance & Repairs
Renovations, extensions and improvements that add value to the property cannot be claimed in the year they are incurred, but are added to the capital value of the property.
You can however claim for any repairs to the property, such as, mending broken doors, repairing appliances, painting and decorating, or repairing the roof.
If you rent your property furnished you can claim the actual cost of the replacement furniture. You used to be able to claim a wear and tear allowance against a furnished property, but this was abolished in April 2016.
Ground Rent & Services
If you have to pay ground rent and a service charge on a leasehold property, these are an allowable cost. You can also claim for gardening or other on site services.
Council Tax & Utility Bills
These are costs that would normally be paid by the tenant, however, if you end up paying them, you can reclaim the whole amount against your rental profits.
You are also able to claim incidental costs, such as travelling between properties, phone calls and stationery. You must ensure that all expenses claimed are 100% for the purpose of your rental business and do not include any personal element, as this would then be disallowable,
Please make sure you have written proof of all expenditure in case of an HMRC enquiry.
There is a lot to consider when deciding whether to purchase a rental property, and in fact whether to keep a rental property. If we can be of any assistance with your rental return or any questions you may have please get in touch email@example.com