Which letting expenses are tax-deductible?
This is a question we get commonly asked by first time landlords. There are lots of things you can deduct against tax as long as they relate the rental property you are paying tax against- this must be genuine. The most important thing to remember is they must be running costs rather than improvement costs like installing a new kitchen.
Running, or revenue costs can include the following- Agent fees, any additional advertising costs and administration charges associated with the letting, interest on mortgage payments (not the capital repayments), service charges and/or ground rent, any services that are not paid by the tenancy such as utilities, water, council tax, cleaning and gardening, maintenance and finally-repairs.
Repairs seem to be the most questioned item on the list. You need to try and understand the difference between repairs and upgrading. Repairs can be understood as keeping the property in the same condition as when it was originally let and upgrade work is making it better than when it was first let.
Repair expenses are most commonly things like fixing a boiler, internal and external decorating and appliance repairs. You can also claim for replacement bathroom suites as long as they are like for like. Interestingly HMRC are allowing replacement windows from single- glazed to double-glazed units to be offset, most likely to encourage landlords to keep their properties energy efficient.
If your rental property is furnished then you can also claim for a 10% wear and tear allowance of the net rent. This covers items like white goods, televisions, curtains and carpets, crockery and cutlery, bedsheets and moveable furniture.
It is advisable to speak to an accountant or financial advisor to gain a deeper understanding of this but I hope this blog gives you a good overview. The most important thing to remember to do is to keep up to date records and receipts so you don’t forget about any important expenditure.