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How to get money from the taxman - with his full support!

Contributed by Housebuyers4U
August 16, 2018

With an improvement in the housing market and favourable tax rules that are not available for other types of investment, being a landlord can be a money spinner. The most important aspect is the tax you pay and how to ensure that you know all the ways you can lower your tax bill.

It can be hard to get your head around but taking the time out to learn about tax advantages to keeping a property may sway your decision to stick with it instead of wanting to sell your house quick.

Maximising the money in your piggy bank.

The bottom line is that if you plan to rent out a property you own, you must notify HMRC. You will be taxed on any income that you will get from property, but the good news is that there are a number of deductions that can be made as 'non taxable expenses' and these can really help reduce your tax bill.

It is well worth seeking good advice if you are a UK landlord and certainly reading good information online as both could save you a considerable amount of money.

What are deductions?

Any expenses that you incur that are purely and exclusively for your rental business (apart from the purchase of the land and/or property and/or alterations) can be deducted from the amount that you owe in tax.

Whilst some of these deductions are well known, others are not, so it is well worth checking that you are aware of all the non taxable expenses that you can be offset against your tax bill – a quick read through the following points could help boost your piggy bank and potentially save you from financial difficulties later down the line!

Preparing your property for rental

  • The cost of having an inventory prepared.
  • Advertising costs for a new tenant.
  • The cost of preparing rental business accounts by an Accountant.
  • The cost of insurance against loss of rents.
  • Letting agent fees
  • Insurance of the building plus contents.
  • Ground rent
  • Mortgage Interest Rates – if your money lender charges you to pay mortgage interest, you can claim.
  • If you are paying a loan to improve the property, the interest on the loan can be claimed.

Preparing to be a landlord

  • Consider employing an Accountant for your rental business – it is often cheaper than you think!
  • Collect and keep all documents and receipts connected to the property purchase.
  • Record all the mileage you do that is connected to your property rental – it adds up! The allowance is currently 45p per mile for up to 10,000 miles.
  • Any other expenses incurred for collection of the rent.
  • Remember that even if you do not make a profit, you must declare your income and expenses.
  • You must keep records of your property letting business for six years after the tax year they are relevant to.
  • Be prompt in declaring your rental income, the penalty could double your tax liability.
  • Don't forget the Rent A Room Scheme. If you don't have a whole house to rent you can rent a furnished room and receive £4,250 per year for doing so!

In between tenants

  • Any Council Tax that is payable whilst the property is empty and you are seeking a tenant.
  • The cost of garden maintenance
  • Any cleaning bills incurred
  • Any insurance claim fees.
  • Any fees incurred for short term leases (less than one year)
  • Marketing the property between tenants.

Ongoing maintenance costs.

Legitimate claims for maintenance and repairs such as cleaning and the replacement of fixtures and fittings and other property problems can be deducted from your tax liability. The guideline on this is that 10% of the rental income can be claimed against general 'wear and tear' for a fully furnished property but certain conditions apply. Significant home improvements however, cannot be claimed for.

* It is important to keep all bills, invoices and other paperwork relating to the rented property for things purchased, repaired and maintained.

You will be able to claim for the following:-

  • Utilities such as gas, electricity and water.
  • Maintenance contracts such as servicing the boiler.
  • Water rates
  • Replacement of windows or doors.
  • Repair of essential items due to damage or wear and tear. This includes broken windows, doors, dealing with such problems as damp, loose roof tiles and guttering. Painting and decorating the property.
  • Replacing the cooker and other white goods and furniture – the cost of a new item for old..
  • Professional fees incurred in the day-to-day management of the rental property.

Be tax smart and complete your tax returns in good time as it saves stress and mistakes made under pressure. Whilst calculating the profits and your income tax liability be sure to maximise on all the income tax deductions we have mentioned to help lower the bill.


Tags: Tax | Utilities | Insurance | investment | interest | insurance | fees | business | tax



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