Can you claim improvement costs necessary to make a house rentable against tax ?

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    Can you claim improvement costs necessary to make a house rentable against tax ?

    Hi,

    if you buy a house within a certain tax year,

    then spend (say) 8k to do improvements necessary to make it rentable

    (such as new carpets, curtains, and legal requirements such as bannister alterations and window restrictions, electrical certs, gas certs)

    Can you claim these costs as an expense in that tax year, even though you had to do it to enable the tenancy to start,

    which is to say - it was undertaken outside of the period of the tenancy (just prior)

    Though within the same tax year

    Thanks in advance

    with regards

    #2
    I always do now, but I don't think I could with my first property. Something to do with the 'letting business' not existing until the first one was let.

    Comment


      #3
      You can claim expenses for up to six years prior to the set up of the business.
      They are treated as being incurred on the first day of the first tenancy.

      I have a feeling that the six years is actually six tax years, but that isn't likely ever to be an issue for a property investment business.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        Thanks for your helpful responses..,

        If you can pardon my terrible ignorance of tax and business matters...

        Can I ask whether I need to have this venture defined/classified AS a business in some way for this to apply?

        What i'm doing now is just filing a personal self assessment tax return, and filling in the page they give you if you tick the box 'do you receive any income from rental of UK property'

        regards

        Comment


          #5
          I think the business declares itself.

          Comment


            #6
            Originally posted by inthelandlordzone View Post
            If you can pardon my terrible ignorance of tax and business matters...

            Can I ask whether I need to have this venture defined/classified AS a business in some way for this to apply?

            What i'm doing now is just filing a personal self assessment tax return, and filling in the page they give you if you tick the box 'do you receive any income from rental of UK property'
            When your new business began, you should have told HMRC and they would have confirmed how they wanted the income to be reported.

            If you are already completing an annual self assessment, you can check that box when you have received income in the tax year - because the expenses you are claiming would be in the same year.

            Are you sure you shouldn't be using an accountant for your tax returns (the cost is, oddly, allowable against income).
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment


              #7
              Hi, should i be using an accountant?

              Tricky question...possibly !!
              Though up til this year I've always considered it very easy to just fill in any pages and answer any questions accurately about two things..

              Money in (all of which goes through my account and is visible as a pay in)
              and money out, which is from reciepts I keep (and generally visible as a pay out from the same account).

              These questions of when expenses occurred are a little more complex I suppose, not in terms of pay in and pay out data, but perhaps the question of when an expense is allowed (my original question).

              Up til now, i've only let bits of the building i live in.

              Having said that, THIS YEAR I accrued some possibly hard-to-classify expenses in terms of legal advice about the new laws, and HMO application,

              complex, perhaps, since it turns out I won't actually end up needing one, though I technically needed to have an application pending
              That also included pricey stuff like a survey and drawing

              Wonder if I can sort one in the next 8 days !!

              Comment


                #8
                They'll all be pretty busy!
                It was just a suggestion (I use an accountant personally).

                Did you actually receive any rental income in the 2018/19 tax year?
                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                Comment


                  #9
                  I would say that improvements were capital expenditure, so you would claim for it when you come to sell, not against income.

                  Comment


                    #10
                    Originally posted by leaseholder64 View Post
                    I would say that improvements were capital expenditure, so you would claim for it when you come to sell, not against income.
                    The list in post 1 aren't capital items.

                    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                    Comment


                      #11
                      Yes, also received rent within that tax year

                      I'm (logically) inclined to think that maybe you can't claim against income, as it is more a case of capital expense,
                      in the sense that, one house could have been bought in great condition, another would need x amount of work.

                      But in the end it's an asset that you are bringing to the market

                      Comment


                        #12
                        If you buy a property for a material amount under market value, some of the work might be capital.
                        If you buy a property that is just a bit tired, fit carpets, fit out the kitchen or bathroom, it's bound to be significantly improved, because new stuff is better than old stuff. But that's not capital expenditure.

                        Changing a room into a bathroom might be, but replacing one bathroom with another probably isn't.
                        The HMRC guidance about capital improvements is all about extensions and new rooms, not a change to the stairs.

                        If your first tenancy began in the 2018/19 tax year, the expenditure you want to claim against the income is recorded as having occurred on the first day of that tenancy.
                        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                        Comment


                          #13
                          Thanks, that makes it clear

                          I'll just ring their advice line anyway , as i have nothing to hide

                          Comment


                            #14
                            Please don't take tax advice from HMRC.
                            Speak to an accountant or a tax advisor.

                            HMRC are targetted with collecting the most tax possible, they're hardly an independent advisor.
                            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                            Comment


                              #15
                              You can use one of the online firms to help complete your tax return and you pay less for tax return service.

                              Comment

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