UK Buy to let

[Candellara]

As title, if you're running this as an individual rather than a Ltd Company, are there any costs you can offset against the profit?

I know that mortgage interest relief is changing but can you claim maintenance, letting agency, mortgage arrangement costs etc?

[red_slr]

Allowable expenses
You can deduct expenses from your rental income when you work out your taxable rental profit as long as they are wholly and exclusively for the purposes of renting out the property.

Find examples of expenses incurred wholly and exclusively for the property rental business.

You can also claim expenses for the interest on a mortgage to buy a non-residential let property.

Other types of expenses you can deduct if you pay for them yourself are:

general maintenance and repairs to the property, but not improvements (such as replacing a laminate kitchen worktop with a granite worktop)
water rates, council tax, gas and electricity
insurance, such as landlords’ policies for buildings, contents and public liability
costs of services, including the wages of gardeners and cleaners
letting agent fees and management fees
legal fees for lets of a year or less, or for renewing a lease for less than 50 years
accountant’s fees
rents (if you’re sub-letting), ground rents and service charges
direct costs such as phone calls, stationery and advertising for new tenants
vehicle running costs (only the proportion used for your rental business) including mileage rate deductions for business motoring costs
Expenses you cannot claim a deduction for include:

the full amount of your mortgage payment - only the interest element of your mortgage payment can be offset against your income
private telephone calls - you can only claim for the cost of calls relating to your property rental business
clothing - for example if you bought a suit to wear to a meeting relating to your property rental business, you cannot claim for the cost as wearing the suit is partly for your rental business and partly to keep you warm - no identifiable part is for your property rental business
personal expenses - you cannot claim for any expense that was not incurred solely for your property rental business
Allowable expenses do not include ‘capital expenditure’, such as buying a property.

https://www.gov.uk/guidance/income-tax-when-you-re...

[Candellara]

Thanks. Big help

[Saleen836]

red_slr said:

Allowable expenses
You can deduct expenses from your rental income when you work out your taxable rental profit as long as they are wholly and exclusively for the purposes of renting out the property.

Find examples of expenses incurred wholly and exclusively for the property rental business.

You can also claim expenses for the interest on a mortgage to buy a non-residential let property.

Other types of expenses you can deduct if you pay for them yourself are:

general maintenance and repairs to the property, but not improvements (such as replacing a laminate kitchen worktop with a granite worktop)
water rates, council tax, gas and electricity
insurance, such as landlords’ policies for buildings, contents and public liability
costs of services, including the wages of gardeners and cleaners
letting agent fees and management fees
legal fees for lets of a year or less, or for renewing a lease for less than 50 years
accountant’s fees
rents (if you’re sub-letting), ground rents and service charges
direct costs such as phone calls, stationery and advertising for new tenants
vehicle running costs (only the proportion used for your rental business) including mileage rate deductions for business motoring costs
Expenses you cannot claim a deduction for include:

the full amount of your mortgage payment - only the interest element of your mortgage payment can be offset against your income
private telephone calls - you can only claim for the cost of calls relating to your property rental business
clothing - for example if you bought a suit to wear to a meeting relating to your property rental business, you cannot claim for the cost as wearing the suit is partly for your rental business and partly to keep you warm - no identifiable part is for your property rental business
personal expenses - you cannot claim for any expense that was not incurred solely for your property rental business
Allowable expenses do not include ‘capital expenditure’, such as buying a property.

https://www.gov.uk/guidance/income-tax-when-you-re...

Rules have changed on this,you can only currently claim a percentage which is being phased out I believe

[chinnyman]

Aren't most BTL on interest only?
Does that mean you can deduct the whole amount?

[david mcc]

chinnyman said:

Aren't most BTL on interest only?
Does that mean you can deduct the whole amount?

That used to be the case but the law changed a few years ago and its been less and less each year since 2017.

Now its 20% tax credit off the mortgage interest, that all.

[red_slr]

Saleen836 said:

Rules have changed on this,you can only currently claim a percentage which is being phased out I believe

Its all in the link provided - it applies to most but not all.

Changes to tax relief for residential property
From 6 April 2020 Income Tax relief on all residential property finance costs is restricted to the basic rate of income tax.

Who is affected
You are affected if you’re:

an individual UK resident who lets residential properties in the UK or overseas
an individual non-UK resident who lets residential properties in the UK
an individual who lets residential properties in partnership
a trustee or beneficiary of trusts liable for Income Tax on residential property profits
All residential landlords with finance costs are affected, but only some will pay more tax.

Who is not affected
You will not be affected by the finance cost restriction if you’re a:

UK resident company
non-UK resident companies
landlord of Furnished Holiday Lettings
You’ll continue to receive relief for interest and other finance costs in the usual way.

[Eric Mc]

You can still offset interest and other finance charges as an expense against the rental income. However, the amount of offset is now much reduced. In fact, only 25% of the total finance costs are allowed AND the cost can only be claimed against that part of the rental income that is taxed at 20% (you get no higher rate tax relief).

Note that the restriction applies to ALL finance costs - not just interest - so bank commissions, bank charges, setting up fees, arrangement fees etc are all caught within these restricted rules.

[98elise]

david mcc said:

chinnyman said:

Aren't most BTL on interest only?
Does that mean you can deduct the whole amount?

That used to be the case but the law changed a few years ago and its been less and less each year since 2017.

Now its 20% tax credit off the mortgage interest, that all.

Residential lettings is the only business I know of where the Government has increased taxes for the smaller players but not big businesses.