If you own a rental property you are obliged to pay tax on any income or profit you make from it. Income tax is payable on any rental income you receive from letting out your property.
The good news is that there are a number of deductions, or allowable charges, that can be written off as non-taxable expenses.
Below is a run-down of those charges and a number of tips to help you make the most of your property investment.
It is always advisable to seek guidance on how to reduce your tax liability both legitimately and effectively. Countrywide Residential Lettings have experience in a range of elements within the rental market and can provide comprehensive income tax guidance in relation to lettings.
In calculating the profits and therefore the income tax liability, expenses are allowable where they are incurred wholly and exclusively for the purposes of the rental business and are not of a capital nature e.g. not the cost of the land, buildings, improvements or alterations.
Broadly, in calculating the profits of a rental business, expenses are allowable where:-
They are incurred wholly and exclusively for the purposes of the rental business; and they are not of a capital nature (the cost of the land and buildings and the cost of improvements and alterations is expenditure of a capital nature).
Subject to the above and any unforeseeable changes, the current expenses will normally be deductible:
Legitimate maintenance and repair costs can be deducted from your tax liability. Expenses such as cleaning, maintenance charges and fixtures and fittings replacements are allowable, significant improvements however, are not. As a guideline ‘wear and tear allowance’ generally allows you to claim 10% of your rental income as a tax deduction on a fully furnished property with certain conditions.
It is recommended that you retain the following information and documents relating to the rental property:
Countrywide Residential Lettings have expertise in all elements of the rental market.
Our Strategy and Tax Guide for new landlords can help you make the most of your buy to let property investments. The guide provides invaluable information on all aspects of becoming a landlord and what’s more it is completely FREE!
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