HMRC, expenses

Posted by Admin - 09/06/2016

 

As a landlord, you may be wondering what expenses you are able to claim back on.

There are two types of expenses you may have which are business expenditure and capital expenditure.  By the end of this blog you will have a clear understanding of which types of spending fall into which expenditure category and you will also know what you are entitled to claim back on.

Rental Running Costs

The running costs of letting your property are called rental expenses or expenditure.  These are the costs that must be paid for you to be able to earn rental profits.  In order to be able to justify your spending it is of utmost importance to keep any records as proof.

Vehicle Running Costs

Did you know that you can claim the cost of business journeys if you use your own vehicle?

If you keep a record of any travel including the date, destination, purpose and mileage done you can claim this back.  This will be at a fixed rate as stated by the Government.  For information on allowances visit https://www.gov.uk/government/publications/rates-and-allowances-travel-mileage-and-fuel-allowances

You are also entitled to claim for actual running costs.  This is worked out by keeping a record of receipts for fuel, repairs and servicing.  Clearly you cannot claim back all costs of the vehicle, you can only claim for costs that are due to business use.

You cannot claim for both mileage and running costs you will need to make a decision between the two.  In most cases whichever one you pick you will have to use until you change the vehicle.

Staffing Costs

If you find yourself needing staff to help oversee the smooth-running of your tenancy/s you are able to claim the cost of their wages and National Insurance as allowable expenditure.  This does not include any money taken from the business for personal use, this would be classed as a private expense and is not allowable.

Rent and Rates

Council rates, water rates, light, heat and power are some of the many things you are able to claim for from the property you let.  Did you know that ground rent is also claimable?  You must ensure you keep all utility bills and any invoices on record to back up your claim.

Repairs

Maintenance and repairs are claimable expenses however improvements are not.  This means that if you as a landlord decided to refurbish the kitchen in your property to increase value, you would not be able to claim this.  This also includes buying a property in a decrepit state for an extremely decreased price and having to undertake works in order for it to be fit for renting.  This is likely to be classed as improvements and not repairs.  This would fall under capital expenditure.

Legal and Professional Fees

Did you know that although HMRC says you do not necessarily need an accountant to monitor your rental accounts, the cost of using one is an allowable expense?  This also includes architects, solicitors and managing agents.

Office Costs

Any stationery, computer, internet, telephone and postage charges can all be claimed back.  However when claiming for telephone calls if you use the same phone for both business and personal you will need to ensure you make a record of the business calls as you are unable to claim for personal calls.  Itemised bills can be a great way to work out how much line rental you can claim on.  This is this same for internet connection.

Capital Expenditure

Items such as vehicles, computers or buildings are classed as capital expenditure.  These are longstanding items and differ in the way that other items are claimed for.  In most cases you can claim a percentage of the value of a capital expenditure and this percentage is called a capital allowance.  For furniture in your rental property you are unable to claim as capital allowance however you are able to claim for wear and tear allowance.

For more information on rental expenses check out our blog!