As a private landlord in the United Kingdom, it's important to understand the various expenses you can claim as tax deductions. These deductions can help reduce your overall tax bill and optimise your rental property investment. In this blog post, we will explore the key expenses that private landlords can claim to maximise their tax savings.
1. Mortgage Interest
One of the most significant deductions available to UK landlords is the mortgage interest deduction. If you have a mortgage on your rental property, you can claim the interest paid on the loan as an expense. It's important to note that from April 6, 2020, the tax relief on mortgage interest has changed from a deduction to a basic rate tax reduction. This means that instead of deducting the interest from your rental income, you will receive a tax credit at the basic rate (currently 20%). Compared to pre 2020 this is not such a good deal for higher rate tax payers but nevertheless still provides a reduction and certainly shouldn't be ignored.
2. Property Repairs and Maintenance
Expenses incurred for routine repairs and maintenance of your rental property are generally tax-deductible. This includes costs for fixing plumbing issues, repairing electrical systems, repainting, and other similar maintenance tasks. It's essential to keep detailed records of these expenses, including receipts and invoices, as proof for tax purposes.
3. Property Management Fees
If you engage the services of a property management company to handle the day-to-day operations of your rental property, the associated fees can be claimed as tax deductions. These fees typically include services such as tenant screening, rent collection, property inspections, and maintenance coordination. Retain documentation of the fees paid to the management company as evidence for your deduction claims.
4. Advertising and Marketing Expenses
Expenses related to advertising and marketing your rental property to attract tenants are deductible. Whether you advertise in local newspapers, online platforms, or hire an estate agent, you can claim the costs incurred. This includes expenses for professional photography, listing fees, signage, and promotional materials.
5. Insurance Premiums
Insurance premiums paid for your rental property can be claimed as tax deductions. This includes landlord insurance, which typically covers property damage, liability claims, and loss of rental income due to certain circumstances. Ensure you keep records of the insurance premiums paid to substantiate your claim.
6. Utilities and Council Tax
The expenses you pay for utilities such as water, gas, electricity, and council tax on behalf of your tenants can be claimed as deductions. It's important to keep track of these expenses by retaining bills, receipts, and tax assessment statements.
7. Legal and Professional Fees
Legal and professional fees related to your rental property can be deducted. This includes fees paid to solicitors for lease drafting or eviction proceedings, accountant fees for tax preparation and advice, and other professional consultations related to property management.
Understanding the tax deductions available to private landlords is essential for maximising your tax savings. By properly documenting your expenses and consulting with a qualified tax professional or accountant, you can ensure compliance with tax laws and optimise your deductions. More information about which expenses landlords can and can’t deduct from their income when working out their taxable profit is available on the government’s website. Making use of these deductions allows you to better maintain, improve, and grow your rental property portfolio, benefiting both you and your tenants.
FreeAgent for Landlords is designed for unincorporated landlord clients who own up to five properties and earn at least £10,000 per year from property and/or self-employment. The software allows you to keep digital records of property income and costs, and track your properties’ profitability. Support for MTD for ITSA submissions will be added to FreeAgent for Landlords before the legislation comes into effect.
Use this tool provided by FreeAgent to calculate the amount of allowable expenses you can deduct from your property income when you calculate your taxable profit.
As a FreeAgent Practitioner, Freedom Cloud Accounting can help you set-up and run FreeAgent for Landlords with ease. If you are an incorporated landlord we can help you maximise the profitability of your portfolio and advise on growth strategies - get in touch to find out more!
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