Letting property — what can I claim? And what do I do if I’ve not declared it to HMRC?
As experienced tax advisors, we can tell you quickly what you are able to claim against your rental property. It is probably more difficult to understand what you cannot claim, but the Revenue’s own website explains in general terms what you can claim and it can be found at the link below and is explained from their website below.
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.
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
- 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:
- enhancements or improvements to the property which are capital expenditure unless they qualify for replacement of domestic items relief
- 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
So this gives you a rough idea, but all of this relies on good records and documentation being provided. Advisers will explain when it is appropriate to use estimated expenses in the absence of documentation particularly during a full voluntary disclosure under the Let Property Campaign or a Revenue Enquiry.
This is because people like banks and letting agents will only ever have records going back six years. You may be declaring rental income for a lot longer period than that. We can discuss with you ways of providing a good reliable estimate by talking to you and familiarising ourselves with your circumstances and maybe digging deep to obtain other documentation to substantiate the claims made e.g. tenancy agreements , emails etc.
From now on we would recommend that you keep all records relating to the income you derive from any rental property and copies of all receipts, invoices, bank statements and dates and information relating to expenditure on the property. You never know when this will be needed in the future.
Contact Andy on 07879 464577 or Lindsay on 07584 706664
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