I am often asked what sort of expenses can be claimed against rental income. Here’s a summary of the more common types of deductible expenditure which I use as a reference for myself as well as for clients.
If you have any questions or would like more information please do contact me.
Travel costs
- Costs of travel between the landlord’s home and the rental property provided that there is no personal reason for the journey (e.g. as part of a holiday)
- Landlords can use the fixed-rate mileage deduction of 45 pence per mile
Loan interest
- From April 2020 loan interest and other finance costs are no longer an allowable expense so cannot be set off against rental income.
- Instead, an amount of up to 20% of the interest and finance costs is given as a reduction from the tax payable by the individual.
- The calculation of the reduction amount can be complex and depends on the amount of rental profits, the availability of property losses, any un-relieved finance costs brought forward from previous years and the individual’s other income for the year.
Maintenance and repairs
General maintenance and repairs to the property and contents are allowable as a deduction.
This can include the cost of like-for-like replacements of items that are fixed to the property such as:
- Guttering
- Windows
- Fitted kitchen appliances
- Fitted bathroom furniture
Replacement of Domestic Items relief
This gives tax relief for the like-for-like replacement of domestic items, such as:
- Household appliances such as fridges, televisions or other (non-fitted) appliances
- Movable furniture such as beds or free-standing wardrobes
- Furnishings such as carpets and curtains
- Kitchenware items such as crockery and cutlery
Relief is not given for the initial purchase of any of these items. Instead, provided that the initial item is no longer available, relief is given for the cost of the like-for-like replacement item.
If there is an element of improvement to the item, beyond a reasonable modern equivalent, then that part of the cost should be disallowed.
Professional fees
Allowable costs would include:
- Accountants costs for preparing accounts and tax computations
- Letting or managing agent fees
- Valuation costs if required for insurance purposes
- Fees incurred for rent collection or recovery
- Costs of renewing a short lease (less than 50 years)
- Costs of preparing a new lease of less than 1 year
Running costs
If the lease or letting agreement does not make the tenant responsible for these charges, or the property is between lettings, running costs can be deducted from profits. This would include things like:
- Utilities such as electricity, gas and water
- Council taxes
- Water rates
- Line rental and broadband cost
Other costs
Other types of expenditure which may be allowable include:
- Advertising for new tenants
- Gardening services
- Cleaning costs
- Security costs
- Ground rents and service charges
- Buildings or contents insurance
- Subscriptions to or membership of landlords’ associations
If you would like more clarification around your specific circumstances please do not hesitate to contact me or book a free informal chat.
