Our five minute read, Tax Tips for UK doctors and dentists will help you save tax, get you organised with your tax affairs and make you feel at ease that everything is taken care of.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice.
Rental property expenses – what can you claim for tax?
When considering tax relief on a rental property, you can deduct any expense that is “wholly and exclusively for the purposes of renting out the property.”
In other words, any cost you incur running or maintaining the rental property, as long as it is 100% for the property, can be deducted from rental income to offset your taxable income.
Revenue expenses, the day to day running costs, are permitted.
Capital expenses are expenses incurred implementing changes or undertaking projects that will be used in the property over a long period of time, such as making renovations or adding furniture or equipment, and these are not deductible from rental income. Down the line, if you sell the property you may be able to claim these costs against Capital Gains tax.
What expenses can you claim in your rental property accounts?
According to Gov.uk, common examples of expenses that can be claimed are:
- general maintenance and repairs to the property, but not improvements
- water rates, council tax, gas and electricity
- insurance, such as landlords’ policies for buildings, contents and public liability
- costs of services, including the wages cleaners and groundskeepers
- letting agent fees and management fees
- legal fees for lets of a year or less, or for renewing a lease for less than 50 years
- accountant’s fees
- rents (if you’re sub-letting), ground rents and service charges
- direct costs such as phone calls, stationery and advertising for new tenants
- vehicle running costs (only the proportion used for your rental business)
Interest on your mortgage is also deductible. And if you incur a cost for part of the year or if only a part of a property is used for commercial purposes, you can deduct that portion tied to the business.
It’s essential that property owners keep “complete, accurate, and readable” records of all expenses in the event that HM Revenue and Customs requests proof that the costs indeed occurred.
You can keep these records in any format you choose as long as all the pertinent information is included and legible. A record may refer to an invoice, receipt, bank statement, rent book, or even a mileage log if you travelled anywhere specifically for your business.
There are different rules for types of rental income so these records all must be kept separate. Property rental business owners are also required to keep these records for the required amount of time, which depends on when you send in your returns.
HMRC has the right to inflict a penalty on those that fail to keep these records or if an inaccurate return was submitted.
The regulations around taxes are intricate and may be daunting handling them on your own. To maximise your tax savings, get in touch with an adviser.