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Redefining Property Management

What are the tax implications of being a landlord?

We often say there is always a good time to buy a property (as long as you are financially prepared). It is a long-term operation, but it remains one of the best investments you can make in the modern market. However, while we are all looking for a good return on investment, some elements require our immediate attention – taxes.

What do you need to be prepared for as a landlord? What are the consequences of building your property kingdom? Are there any deductions you can look forward to? Here’s a breakdown.

It’s not as grim as it looks. Here’s a list of expenses you can deduct from your tax in full:

  • Accountancy fees (everything from company registration through consultancy fees to tax settlements)
  • Architect’s fees
  • Estate and property management agency’s fees
  • Marketing (including building a website, online marketing, and social media campaigns – even if you are outsourcing its creation and curation)
  • Office materials and expenses (as long as you are not working from home, as working from home expenses are calculated in a slightly different way)
  • Employees
  • Suppliers such as cleaners, gardeners, etc.
  • Training and education relating to property investment
  • Business travel and commuting miles (depending on whether you use a company car, there are various ways of calculating mileage, so consult with an excellent accountant to suggest the best solution)

Insurance and Service Charges

Service charges made solely for your rented properties or solely for the benefit of your tenants are tax deductible. These include:

  • Property insurance
  • Rent guarantee insurance
  • Public liability insurance
  • Contents insurance for furnished properties
  • Ground rents where applicable
  • Council tax when paid by the landlord or in a void period
  • Electrical safety certificates
  • Gas safety certificates
  • Landlord licences where applicable
  • Water rates where applicable and when paid by the landlord
  • Gas where applicable and when paid by the landlord or in a void period
  • Electricity where applicable and when paid by the landlord or in a void
  • period
  • Wages for gardeners and cleaners if they are in the rental agreement and
  • used only for rental properties

While the above could be described as expenses that most businesses can claim, landlords can benefit from a longer list of deductible expenses:

  • Cracked and broken pipes repair
  • Repair and/or exchange of external and internal doors, windows, walls, gutter, rooftiles, kitchen tiles, etc.
  • Renovation to restore the original state of the property
  • Damp and mould removal
  • Heaters, boilers, water tanks, shower cabins, kitchen units (excluding electric appliances)
  • Equipment hire, should you need it to perform necessary repairs

Here are a few items you may not have considered tax-deductible, and they are!

  • Landlord’s insurance
  • If you are replacing a domestic item, you can claim its cost, as long as it’s a like-for-like swap. In some cases, it can become more complex than simply deducting the price of a new couch from the tax, so it’s best to consult an accountant if you are planning a major renovation.

Whatever you’re doing, however, KEEP THE PAPERWORK!

Truth to be told, like in any business, working with a reliable accountant can make the difference between staying on the good side of the HMRC and is likely to save you more money than you spend on them. If you are looking for a good accountant that knows their way around the property industry, give us a call, and we can put you in touch.

Article written in cooperation with SN Accountants.

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