Tax Deductions for UK Landlords: A Comprehensive Guide
As a landlord, income earned from your property is taxable, however, understanding what expenses can be deducted from your rental income can be pivotal in ensuring you are not paying more tax than you should. For those navigating the tax system, it's crucial to be aware of allowable expenses.
Here’s a detailed overview for landlords, outlining the deductible expenses against property income:
1. Mortgage Interest The interest part of your mortgage payment can be deductible, not the capital. However, it's important to note that this relief has been scaled back and has been replaced by a tax credit system for many landlords.
2. Wear and Tear Allowance For fully furnished properties, landlords used to be able to claim a wear and tear allowance. This has been replaced. Now, landlords can only claim for the actual cost of replacing furnishings in the rental property.
3. Repair and Maintenance Costs Landlords can deduct the costs of repairs and maintenance. This could include mending broken windows, doors, furniture, and appliances. It does not cover 'capital expenditure' which means you can't claim for a full property renovation.
4. Insurance Premiums Premiums for buildings, contents, and public liability insurance can be deducted.
5. Agent’s Fees If you use an agent to manage your property, their fees can be deductible. This includes both letting and management fees.
6. Ground Rent and Service Charges For leasehold properties, the associated ground rent and service charges can be deductible expenses.
7. Utility Bills If you pay the utility bills (like gas, electricity, and water) on behalf of the tenant, you can deduct these costs. This is common in inclusive rental agreements.
8. Council Tax If the council tax is under the landlord's name and not passed on to the tenant, it's deductible.
9. Services Costs of services, such as gardening or cleaning of communal areas, can be deductible.
10. Legal, Management and Professional Fees This includes the cost of accountants, solicitors, surveyors, or any professional engaged in the property's management.
11. Other Property Expenses Other direct costs of letting the property, like phone calls, stationery, advertising for tenants, or travelling to and from your property for management purposes can be deducted.
12. Cost of Replacing Domestic Items Landlords can claim tax relief for the replacement of household items like beds, crockery, carpets, and appliances.
Ensuring you take full advantage of these allowable expenses can substantially reduce your tax bill. Always keep detailed and dated records of all expenses.
If you need help preparing your tax return as a landlord, get in touch today to find out how we can help.