A Landlords Guide to Allowable Tax Deductable Expenses
Understanding what expenses you can claim on your tax return is essential to maximise your rental income and minimise your tax bill. Knowing which expenses you can deduct can be a game-changer, as it allows you to offset your rental income, reducing your overall tax liability.
In this guide, we will provide you with a comprehensive overview of allowable expenses for landlords. We’ll cover everything from what expenses are claimable to how to keep records, so you can make sure you are claiming for everything you are entitled to. By the end of this guide, you will have a clear understanding of the expenses that you can claim back, helping you to manage your rental property finances effectively and reduce your tax burden.
What are allowable expenses?
Allowable expenses refer to expenses that landlords can deduct from their rental income when calculating their taxable profit. This means that you only pay tax on the profit you make after deducting these expenses. It’s a crucial aspect of managing your rental property finances, as it can help you reduce your tax bill and maximise your rental income.
To put it simply, allowable expenses are the costs that you incur in relation to your rental property, such as mortgage interest payments, property maintenance and repairs, letting agent fees, and insurance premiums. By deducting these expenses, you can lower your overall taxable income, allowing you to keep more of your rental income. Overall, understanding what expenses are allowable is essential for every landlord, as it can help them manage their rental property finances more efficiently and effectively.
What expenses are allowable?
There are a wide range of expenses that are allowable for landlords in the UK. Some of the most common allowable expenses are:
1. Mortgage interest
You can claim back the interest on any mortgage or loan that you have taken out to buy, improve, or repair your rental property.
2. Repairs and maintenance
You can claim back the cost of repairs and maintenance on your rental property, including decorating, replacing fixtures and fittings, and repairing appliances.
You can claim back the cost of any insurance that you have taken out for your rental property, including buildings insurance, contents insurance, and landlord liability insurance.
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4. Letting agent fees
You can claim back the fees that you pay to a letting agent for finding tenants and managing your property.
5. Council tax and utility bills
You can claim back the cost of council tax and utility bills that you pay on your rental property.
You can claim back the cost of advertising your rental property, including the cost of creating and distributing flyers, and placing adverts in newspapers and online.
7. Legal and accountancy fees
You can claim back the fees that you pay to legal and accountancy professionals for advice and assistance on managing your rental property.
8. Travel expenses
You can claim back the cost of travel that you incur for managing your rental property, including visiting your rental property and attending meetings with letting agents, tenants, and contractors.
What expenses are not allowable?
There are also some expenses that are not allowable for landlords in the UK. Some of the most common expenses that are not allowable are:
1. Capital expenditure
You cannot claim back the cost of any improvements that you make to your rental property, such as extensions, conversions, or major renovations. However, you can claim back the cost of repairs and maintenance on these improvements.
2. Personal expenses
You cannot claim back the cost of any personal expenses that you incur in relation to your rental property, such as the cost of your own phone and internet bills, or any personal expenses that you incur while visiting your rental property.
3. Non-rental expenses
You cannot claim back the cost of any expenses that are not related to your rental property, such as the cost of your own home, or any expenses that you incur in relation to a second home that you own.
How to claim allowable expenses?
To claim back allowable expenses, you will need to include them in your tax return. You can either do this yourself, or you can use the services of a professional tax advisor or accountant.
Claiming back allowable expenses can be a game-changer for landlords looking to maximise their rental income and reduce their tax bill. However, to claim these expenses, it’s crucial to keep accurate records of all expenses related to your rental property. Maintaining good records ensures that you have the necessary evidence to back up your claims and avoid any potential disputes with HM Revenue & Customs (HMRC).
Furthermore, seeking professional advice can be beneficial, particularly if you are unsure about what expenses you can claim back. Tax laws and regulations can be complex and confusing, making it easy to overlook some deductible expenses or accidentally claim for non-allowable ones. A professional accountant or tax advisor can provide you with expert guidance and help you navigate the tax system to ensure you are claiming everything you are entitled to.
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Sam has a wealth of experience across the private landlord and Build to Rent sectors. He has advised a wide range of clients across the whole of London on how to find great tenants, improve their assets and effectively market their properties for the best returns.