Expenses off-set against income tax

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    Expenses off-set against income tax

    Hi All, I have a question that might have been asked but could find it here.. I am an overseas landlord with only one buy-to let property in the UK. My monthly expenses are more than the rental income so on an annual basis I make a loss. I understand that these expenses can be claimed against tax and that any losses can be carried over to the next tax year. However what happens when I sell the property? What will happen to those losses, do they fall away or will HMRC deduct it from capital gains tax or will they pay it out as cash?

    Secondly, incase i do not sell and keep on renting out and continue to make losses each year, how will I be able to recover those losses?

    #2
    Buy a book on property tax. There are more than 10 taxes a landlord may pay, You need to worry about & keep records for all, not just income tax (brought in to pay for war with the French).

    When you say expenses were you including a repayment mortgage? If so you might be making a profit .
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

    Comment


      #3
      thanks I think buying and reading a book on property tax would be overkill for the question I asked. The expenses i refer too includes the interest portion of the mortgage, I still have more expenses than rental income. Do you have any advise for my question?

      Comment


        #4
        Mortgage interest is no longer allowed as an operating expense against rental income by HMRC.

        You may be making a profit and may be liable for income tax.

        https://www.which.co.uk/money/tax/in...d-atnsv0j6j782

        Comment


          #5
          Originally posted by xenoid View Post
          My monthly expenses are more than the rental income so on an annual basis I make a loss. I understand that these expenses can be claimed against tax and that any losses can be carried over to the next tax year. However what happens when I sell the property? What will happen to those losses, do they fall away or will HMRC deduct it from capital gains tax or will they pay it out as cash?
          When the business ends you can carry on carrying the losses forward, but, unless you start a new business taxed in the same manner, they're of no use to you.
          You can't use them to offset CGT>

          Secondly, incase i do not sell and keep on renting out and continue to make losses each year, how will I be able to recover those losses?
          Essentially, not from tax.
          So, you'd need to make the business profitable in order to not to continue to lose money.

          thanks I think buying and reading a book on property tax would be overkill for the question I asked.
          That's a little scary, because I don't see anything in your question about how you recover the tax already paid to HMRC before the rent money was paid overseas, which sounds like you are committing an offence (as is whoever sends you the rent).
          Your problem should be that HMRC have an amount of your money already paid in tax and you want to recover it, not that you want to carry forward losses.
          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


            #6
            thank you for answer the first two parts of my question. There was no need to buy a book on tax after all.

            as for your response below.. no, i submit tax on an annual basis. rent is paid in UK bank account. All expenses are listed in tax submission. all legal and above water. problem is due to repairs, landlord license, electrical certs.. service charges etc.. the losses were more than the annual rental income.. so i guess if this trend continuous, I will need to sell or take equity out of the property for other investments.

            That's a little scary, because I don't see anything in your question about how you recover the tax already paid to HMRC before the rent money was paid overseas, which sounds like you are committing an offence (as is whoever sends you the rent).
            Your problem should be that HMRC have an amount of your money already paid in tax and you want to recover it, not that you want to carry forward losses.
            [/QUOTE]

            Comment


              #7
              Why run a business at a loss ?
              I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

              Comment


                #8
                Sounds like a great investment. HMRC will definitely be exploring those expenses in due course.

                Comment


                  #9
                  How many years have you been running at a loss?

                  Comment


                    #10
                    Originally posted by xenoid View Post
                    as for your response below.. no, i submit tax on an annual basis. rent is paid in UK bank account. All expenses are listed in tax submission. all legal and above water. problem is due to repairs, landlord license, electrical certs.. service charges etc.. the losses were more than the annual rental income.. so i guess if this trend continuous, I will need to sell or take equity out of the property for other investments.
                    I can easily imagine that a couple of costly repairs might knock a property into a short term loss, but a rental property let out at a rent that doesn't cover the basic costs of operating it long term sounds very odd indeed.

                    How on earth can that happen?


                    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
                      monthly rent 1250 ... buy-to let mortgage 873.12 - certificates (elec, gas, PAT, Fire and risk, EPC), maintenance and repairs, council landlord licence costs, service charges, landlord insurance.... all of these quickly erode the rental income.. mortgage is high since is an overseas Buy to let mortgage... any good advise?

                      Comment


                        #12
                        If the maintenance, insurance, certificates and other stuff is costing more than £4.5k per annum you should probably sell the property.
                        That mortgage is ludicrous for a BTL, unless the value of the property and the market rent are completely out of whack or it's not interest only.
                        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
                          Originally posted by xenoid View Post
                          any good advise?
                          Yes, sell up.

                          Comment


                            #14
                            jpkeates,

                            Indeed its a capital repayment mortgage at 3.09% (very high i know) .. not many lenders will to remortgage for overseas BTL at a good rate.. value of property is £330 000 and Rent £1250 increasing to £12750 in august... still not good enough for expenses. So I will sell the property.
                            recent electrical re-wiring set me back £4000 as well.

                            Comment


                              #15
                              The mistake is to expect to make a profit with a capital repayment mortgage.

                              If you're using the rent to build up equity, that's a perfectly sound plan, but it's almost impossible to make a decent annual profit at the same time (outside some quite specialist markets).
                              If you want annual profit, switch to an interest only mortgage; you don't build up as much (or any) equity unless the market rises, but that's how most UK landlord's operate.
                              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

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                              • Reply to Damaged artwork expense
                                by ram

                                As per above, as the place is "part-furnished", which will not incude pictures on walls.

                                It's a gift to a stranger. ( They are not family, not close friends - etc. ) and not a claimable expence in any way..
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                                Hi all

                                Silly minor question really. Last week the tenant accidentally knocked a framed picture off the wall and smashed it. It was only a cheap thing (I guess value was £10). I went out and bought a replacement picture for her. (I know I didnt have to, but shes a good tenant). I bought...
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                              • Reply to Damaged artwork expense
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                              • Reply to Damaged artwork expense
                                by jtufty
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                              • Reply to Damaged artwork expense
                                by Section20z
                                You don't need to write anything. Retain the receipt and just include the appropriate amount in youR expenses/capital totals...
                                25-09-2021, 13:57 PM
                              • Reply to Damaged artwork expense
                                by ram

                                We assume the place is let as furnished ?

                                I don't think pictures are classed as furniture / but then again, a mirror screwed to the wall - if broken by the tenant, then the tenant pays.
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                                I would charge the tenant the cost of replacement.
                                ...
                                25-09-2021, 11:43 AM
                              • Reply to Damaged artwork expense
                                by jtufty
                                Thanks guys. I dont know what came over me! A momentary wave of altruism. Most unlike me!

                                I have the receipt. What should I log it as? Should I literally just write "capital expense" or should I be more specific such as "replacement of broken picture"?
                                25-09-2021, 06:45 AM
                              • Reply to Damaged artwork expense
                                by jpkeates
                                It's a replacement item of furniture and its allowable as such.
                                There's an inevitable element of betterment when you replace one thing with another.

                                And £40 is neither here nor there as a capital item.
                                24-09-2021, 13:16 PM
                              • Reply to Damaged artwork expense
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                                That sounds definitely like an improvement as you didn't have to splash out £50 you crazy dude.
                                £10 down to repairs and £40 capital expense I reckon.
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