Tax Allowances

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Tax Allowances

    Last year I bought a property which I have since been letting.This was a new diversion for me.
    I'm now doing the dreaded Self Assessment Tax return.
    I understand about setting off on-going expenses ( interest & redecoration) against income. What I am not clear on is what elements of the "start up expenses" (if any) are allowable.
    In particular..
    1.Conveyancing fees
    2.Stamp Duty
    3.Survey
    4. Redecoration in readiness for new tenants.
    5. Gas & electric Certification
    6. Property Insurance
    7. Mortgage Arrangement Fee
    8. Finders Fee (paid to an Agency to find a tenant)
    Can anyone answer these questions or point me to a guide that does answeer them? many thanks

    #2
    Broadly speaking, 1 to 3 are capital and not allowable as they have been incurred in acquiring the property.

    Redecoration etc in readyness for letting is strictly not allowable as this has been incurred to put the property in a fit state of repair before the lettings business commenced and not as a result of it. Subsequent redecorations will be allowable.

    5 to 8 are allowable but if they cover a period spanning two tax years, the expense will need to be apportioned accordingly. eg If insurance covers the period from 1.10.04 to 30.09.05, it will be split half and half between the two tax years.

    Furnishings are not allowed but instead a wear and tear allowance is given equal to 10% of the gross rentals for each tax year.

    Ramnik
    Private advice is available for a fee by sending a private message.

    Comment


      #3
      Many thanks.
      How does the wear & tear work? If say 10% of annual rent is £1000- is this set as an expense to be deducted against income- even though no money was spent in that particular tax year?

      Is there an Inland Revenue guide to this?

      Comment


        #4
        If the house is furnished, you don't get any allowance for the actual amount spent on furnishings. Instead, you claim 10% of (gross rents less any expense you paid which is normally the tenant's responsibility, eg water, council tax, utility bills etc). You could keep claiming this as long as you let the house furnished even if you haven't spent any money on furnishings in later years. If your gross rents in year one is £10,000, you would claim £1,000; if gross rent in year 2 is £12,000, you would claim £1,200 and so on.

        The Land & Property page L2 of the self assessment tax return has a separate box 5.37 in which to enter and claim this.

        This should be explained in the notes which come with the self assessment tax return Land & Property page. Also there should be explanations about this on Inland Revenue website

        Ramnik
        Private advice is available for a fee by sending a private message.

        Comment


          #5
          Originally posted by Karongo
          Broadly speaking, 1 to 3 are capital and not allowable as they have been incurred in acquiring the property.

          Redecoration etc in readyness for letting is strictly not allowable as this has been incurred to put the property in a fit state of repair before the lettings business commenced and not as a result of it. Subsequent redecorations will be allowable.

          5 to 8 are allowable but if they cover a period spanning two tax years, the expense will need to be apportioned accordingly. eg If insurance covers the period from 1.10.04 to 30.09.05, it will be split half and half between the two tax years.

          Furnishings are not allowed but instead a wear and tear allowance is given equal to 10% of the gross rentals for each tax year.

          Ramnik
          So what does this cover, the cost of paint, a decorator, brushes ...... Does it also cover the material cost of say a new kitchen, or maybe just the doors, how about skilled labour. Many questions I know!

          Comment


            #6
            QUOTE: 'So what does this cover, the cost of paint, a decorator, brushes ...... Does it also cover the material cost of say a new kitchen, or maybe just the doors, how about skilled labour. Many questions I know!'

            REPLY: A new kitchen will be improvements. Changing doors will be improvements if changed before tenancy commences. Skilled labour? For doing what might I ask? But please don't answer this as we could go on and on......

            Basically, as a rule of the thumb, you have to decide whether you are improving the property or simply carrying out the ongoing maintenance work as a result of wear & tear after the tenancy has started. Some of the expenses will be for renewing furnishings for which you are only allowed the standard (10% x gross rents) wear & tear allowance.

            Ramnik
            Private advice is available for a fee by sending a private message.

            Comment


              #7
              Karongo
              I believe that you have always been able to claim either the replacement cost of furniture, or the 10% wear & tear allowance, but not both.
              Once you have opted for the 10%, you have to stick to it. However, it is generally beneficial to claim the 10% wear & tear allowance.

              If, while carrying out ongoing repairs, you also improve the property, then strictly the improvement element cannot be allowed against rental income, but could be used as an addition to the cost of the property in a capital gains computation when it is sold. So - keep all bills!

              Comment


                #8
                I am confused over the 10% Wear & Tear allowance and what is covered by this allowance. I understand that it will cover the furnishings etc.

                Does it cover the redocoration & maintenace of the property, or is this another allowable expenditure?

                Also, I know that I will need a new central heating boiler in the next few years, as it is 18 years old now, and supposidly parts are difficult to obtain, will I be able to claim for this?

                TIA

                Comment


                  #9
                  'I am confused over the 10% Wear & Tear allowance and what is covered by this allowance. I understand that it will cover the furnishings etc.'
                  REPLY: It covers mostly all items which are not permanently attached to the property, mainly furniture, soft furnishings and white goods.

                  'Does it cover the redocoration & maintenace of the property, or is this another allowable expenditure?'
                  REPLY: This is allowed in its own separate right.

                  'Also, I know that I will need a new central heating boiler in the next few years, as it is 18 years old now, and supposidly parts are difficult to obtain, will I be able to claim for this?'
                  REPLY: This will be allowable as repairs and renewal.

                  Ramnik
                  Private advice is available for a fee by sending a private message.

                  Comment


                    #10
                    Originally posted by Karongo
                    'I am confused over the 10% Wear & Tear allowance and what is covered by this allowance. I understand that it will cover the furnishings etc.'
                    REPLY: It covers mostly all items which are not permanently attached to the property, mainly furniture, soft furnishings and white goods.
                    So I assume that a fitted oven & hob would not be included in the 10% wear & Tear allowance.

                    Also if I claim for the 10% Wear & Tear allowance, I assume that I can still claim for repairs on a dishwasher I had to have repaired this year.

                    Thanks

                    Comment


                      #11
                      Well, the way I read it, the 10% wear and tear allowance would include certainly the repair. You are already getting the 10% to cover wear and tear to items, so your dishwasher, so this would mean you get this money twice. I am also unsure if you could claim the oven either, as surely this is replaced due to wear and tear of the original oven?
                      Any posts by myself are my opinion ONLY. They should never be taken as correct or factual without confirmation from a legal professional. All information is given without prejudice or liability.

                      Comment


                        #12
                        Originally posted by MrShed
                        Well, the way I read it, the 10% wear and tear allowance would include certainly the repair. You are already getting the 10% to cover wear and tear to items, so your dishwasher, so this would mean you get this money twice. I am also unsure if you could claim the oven either, as surely this is replaced due to wear and tear of the original oven?
                        Yes I thought that about the dishwasher, as it is freestanding. However, if the oven & hob were built into the kitchen, I believe that you can claim for repairs to them, as they are an integral part of the house then. However, I have remembered, that the cooker & oven are freestanding, so this does not apply.

                        Comment


                          #13
                          That is an interesting point regarding the fitted oven....would it count? I personally would say it wouldnt count as seperate as it is still part of furnishings, but is that actually the case?
                          Any posts by myself are my opinion ONLY. They should never be taken as correct or factual without confirmation from a legal professional. All information is given without prejudice or liability.

                          Comment


                            #14
                            Originally posted by MrShed
                            Well, the way I read it, the 10% wear and tear allowance would include certainly the repair. You are already getting the 10% to cover wear and tear to items, so your dishwasher, so this would mean you get this money twice.
                            Well according to paragraph 357 in the goverments IR150 document given below, you can claim for the repair of the equipment!

                            357. If you chose to take the 10 per cent wear and tear allowance, you can’t later claim for the cost of replacing the assets (but you can claim the cost of repairing them). You can’t deal with some assets on one basis and some the other. If you take the 10 per cent wear and tear allowance that is the only relief you can have for the depreciation of machinery and plant (furniture, furnishings and fixtures etc) of a type which, in unfurnished accommodation, a tenant would normally rovide for himself (see paragraph 353).

                            Comment


                              #15
                              Fair enough I stand corrected! strange! So technically speaking you could just keep repairing and repairing something to save money rather than replace it. That paragraph also seems to say that fitted ovens would be part of the 10% wear and tear, not seperate
                              Any posts by myself are my opinion ONLY. They should never be taken as correct or factual without confirmation from a legal professional. All information is given without prejudice or liability.

                              Comment

                              Latest Activity

                              Collapse

                              Working...
                              X