Allowable costs for property businesses

Costs that can be deducted by individuals that have a property rental business, depend on the type of property that is being rented out. There are three main categories of property business that need to be considered.

Residential properties

This is by far the most common type of investment property held by individuals. Tax relief can be claimed on allowable expenses incurred in the day-to-day letting of the property. These can include expenses such as:

  • letting agent’s fees,
  • certain legal fees,
  • accountant’s fees,
  • building and content insurance and
  • certain services paid for by the landlord such as cleaning or gardening.

Landlords can also claim the Replacement of Domestic Item Relief. The relief allows landlords to claim for the replacement of items in a rental property, for example: furniture, furnishings, appliances and kitchenware. There is no relief available for the initial cost of domestic items purchased for a new or existing rental property, and the relief is restricted where a replaced item is also an ‘improvement’.

In addition, as most of our readers will be aware, the tax relief on finance costs (such as mortgage interest) used to buy investment properties is gradually being restricted to the basic rate of tax. This restriction will be fully in place from 6 April 2020. In the current 2018-19 tax-year, the amount of higher rate tax relief on finance costs is restricted to 50%.

Furnished holiday lettings

The furnished holiday let rules allow holiday lettings of properties that meet certain conditions to be treated as a trade, and therefore, qualify for a number of additional tax reliefs. These include: Capital Allowances for items such as furniture, equipment and fixtures as well as a number of valuable Capital Gains Tax reliefs.

Posted by Cassey Nixon on

31st August 2018

Categories

  • Statutory payment rates for the tax year 2019/20

    The following statutory payment rates have been confirmed: The standard weekly rates of Statutory Adoption Pay (SAP), Statutory Paternity Pay (SPP) and Statutory Shared Parental Pay (ShPP) will increase from £145.18 to £148.68 from 01 April 2019. The weekly rate of Statutory Sick Pay (SSP) will increase from £92.05 to £94.25 from 06 April 2019 […]

  • Cycle to work schemes

    There are special rules involving bicycles usually referred to as ‘Cycle to Work’ arrangements. The Cycle to Work scheme was introduced almost 20 years ago to help promote the use of healthy ways to commute to work using an environmentally friendly mode of transport. Employers of all sizes across the public, private and voluntary sectors […]