Last minute tax question - Empty BTL property

[Hornsey]

I'm just doing my tax return and have a question about a property I bought as a BTL. It was empty while I renovated so there was no income from the property in the 08/09 Tax year. How do I deal with the interest on the mortgage payments for this period? I think I will be finding an accountant for next year as we are looking at adding another property and Tax returns are not my strong point!

[touching cloth]

As far as I understand it, losses on property cannot be offset against other income to reduce your tax in this year, however the loss can be carried over to next year to set against future profits made on property. Having said that do get an accountant, much easier.

[Wings]

You are allowed to claim the interest on the loan, together with all renovating costs. The only thing you might want to consider is whether it might be best to carry those allowable expenses over to the next accounting/taxable year.

[Eric Mc]

Prepare your rental income and expenditure figures as you normally would - only in this year you will only have expenditure and no income. This will generate a rental loss for tax year 2008/09. This loss is then carried forward to the next tax year for offset against future rental profits.

Generally renovation costs will be allowed as offsetable expenses in the rental accounts. However, expenditure of a capital nature will not.

Instead, these types of costs should be recorded somewhere safe as they will be allowable as "Enhancement Expenditure" if and when the property is disposed of and a Capital Gains Tax computation needs to be prepared.

[Hornsey]

Thanks for the help guys

[Piglet]

LOL Eric, I think you might be busy on here this weekend

[Eric Mc]

Luckilly for PHers, I have virtually completed all my self assessment work for the year. Just one tax return remains to be submitted and I should get the go ahead from the client to do that by mid-day tomorrow.

I did not want to be working flat out on Sunday trying to process returns.

As it is, I do have to visit a client tomorrow to complete his VAT return. There's always something.