Wondering whether to renovate makes sense?

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    Wondering whether to renovate makes sense?

    Hey everyone

    I'm considering adding a second BTL property to my portfolio however the property isn't in the greatest of conditions and could do with some work (Updating the Kitchen/Bathroom at least).

    If I went ahead on the property and renovations would they be claimable as CGT or would they be allowable expenses considering I'm buying the items (Dated Kitchen/Bathroom) within the property as part of the property price? I've got little experience with BTL and taxes but I understand if I'm replacing like for like then things should come under allowable expenses.

    Any advice would be appreciated

    Pete

    #2
    They're probably a bit of both.

    If you're buying a property sufficiently run down that it reduces the purchase price, the proportion of the work that increases the value of the property will be capital. But it's likely that the actual cost will be greater than the increase in the value of the property, so that element is allowable against income (provided it's solely and exclusively for the business).

    Any replacement or repair is going to have an element of improvement that isn't capital, a new kitchen is pretty much certain to be better than the old one being replaced, but that doesn't make it a capital improvement per see. But making the kitchen bigger or adding a new bathroom would be much more likely to be capital.

    It's not an exact science, and providing you can justify the split rationally, you can probably bend the spending to meet whatever your tax goals are.
    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).

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      #3
      If the kitchen & bathroom are still functional, I just give them a good clean, and paint the walls magnolia. Sometimes I replace the taps or toilet internals if these are the only faulty bit.

      (There is nothing more heartbreaking than to have a beautiful kitchen abused by your tenants.)

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        #4
        Originally posted by JK0 View Post
        and paint the walls magnolia.
        I didn't know landlords are still actively painting their rentals in magnolia

        Magnolia is very dated, Stick to white! Much more modern

        As for the kitchen, if the units are sound then why not just replace the doors. Maybe even the worktop. Basically anything that is solid... keep, anything that looks dated... replace.

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          #5
          If you buy a property is poor state and refurbish it before renting out , the entire cost should be a capital expense which is added to property purchase cost. ( and used after sale of property for computing capital gains tax.).

          But hmrc rules allow for "maintenance expenses" incurred before start of rental period to be charged on first day against the rental income. This means you can pick out some expenses paid for redecoration and replacing worn furnishings ( carpet , curtains ,etc ) for charging against the rental income.

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