Many people letting out property for the first time who become clients ask us whether there are any expenses landlords can claim.
Generally speaking, landlords can claim the expenses of running and maintaining their property. By claiming these expenses, profits will reduce and that can reduce their tax bill.
But as well as the more obvious expenses, such as maintenance, there are others that are legitimate expenses.
Expenses landlords can claim
Some of the obvious allowable expenses landlords can include:
- Water rates
- Council tax
- Gas and electricity bills (if these are included as part of rent charged)
- Landlord insurance
- Gardening and cleaning costs
- Letting agents’ fees
- Legal fees
- Accountant’s fees
- Ground rents
- Services charges
Direct costs such as phone calls, administration costs and advertising.
The expense should be incurred wholly and exclusively as a result of renting out your property. Where only part of the expense meets this condition, you can deduct that part from your income. For example, the cost of lighting and heating a property which is partly used for private purposes as well as renting.
If you let only part of your home, or let it out for only part of the year, you have to apportion your expenses.
You can also claim back some of the interest on buy-to-let mortgages, but it’s worth researching this separately as rules have changed in the last few years.
Changes when renovating properties
Updating a property and renovating a property has caused some confusion in recent years for landlords relating to expenses.
If the property being let is fully furnished, you used to be able to claim for wear and tear of furnishings, such as cookers, carpets, beds and televisions.
The wear and tear allowance allowed you to claim a maximum of 10% of the net annual rent (income less expenses) each year. But this has now changed.
The government now allows you to claim tax relief on anything you spend on replacing what it labels as a ‘domestic item’. This only applies to items you are replacing. You can’t claim tax relief on the actual cost of kitting out a property for the first time with furniture or appliances. It only applies when an item is genuinely replaced and no longer used in the property.
Which domestic items qualify?
The government lists a number of examples of what domestic items qualify for this new relief. These include replacement:
- Beds
- Carpets
- Crockery or cutlery
- Curtains
- Fridges and washing machines
- Sofas
It’s worth remembering that you can only claim for a like-for-like replacement.
It has become harder to earn money as a landlord in recent years with many changes. But with good accountancy and an understanding of the rules, you can still make buy to let investments profitable.
We specialise in accounts for landlords, so contact us today if you have any questions about expenses you can legally claim.