Buying another buy to let property- what costs can be deducted from the income?

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    Buying another buy to let property- what costs can be deducted from the income?

    Hi,
    I have recently bought a second buy to let property and a little unsure of what costs that can actually be deducted from my income. Hope someone can help.
    I let out my first property since 2014 and the purchase of the second property completed in May 2016 and it was then been let out in June.
    I am currently completing tax returns for April 2016 and would like to have some advise of which of these purchasing costs (if any) can be deducted against my rental income?
    - legal cost of purchasing the second property
    - survey fee
    - mortgage arrangement fee
    - mortgage application fee
    - other costs associated when purchasing this property e.g. searches, ID verification etc

    My questions are::
    - which of the above costs can be deducted against rental income?
    - although the completion of the second property was done in May 2016 but some of the costs was spent between Jan 2016 to April 2016 (i.e. within the April 2016 tax year)- should the costs be claimed in 2016 or 2017 (as the property was let from June 2016 so it falls in the next tax year)? If the costs to be claimed in 2016 it will mean that it will be deducted against the rental income from my first property- will this be ok?
    - I have also tried to purchase another property back in Dec 2015 but the buyer dropped out last minute and I have already spent some legal costs and survey fees- can I deduct this cost/loss from my rental income in 2016?

    Hope someone can help.

    Thanks.

    Angie

    #2
    - legal cost of purchasing the second property - This is a capital cost and can be offset against any Capital Gain for tax purposes on disposal (assuming current rules continue until then).
    - survey fee - Ditto (unless its a mortgage survey)
    - mortgage arrangement fee - Yes allowable against income. Strictly speaking it should be apportioned across the length of the mortgage, but many people don't.
    - mortgage application fee - Yes.
    - other costs associated when purchasing this property e.g. searches, ID verification etc - If they're to do with buying it, they're Capital, if to do with funding it or preparing for rent, probably allowable.

    Because your letting business already exists, the usual rule about claiming the costs falling on the first day of the tenancy doesn't apply. The costs can be claimed when they arose.

    You can't claim anything for a failed purchase.
    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


      #3
      Originally posted by jpkeates View Post
      - mortgage arrangement fee - Yes allowable against income. Strictly speaking it should be apportioned across the length of the mortgage, but many people don't.
      - mortgage application fee - Yes.
      Is that definitely the case? For the first letting, ie when talking about the funds used to purchase the property in the first place, I'd have thought that these would have been capital costs. Different for subsequent remortgages, obviously.

      I think that's how my accountant considered it last time this applied to me (but I could be wrong, as could my accountant - he was on other matters!)

      Comment


        #4
        I'm not sure that I could claim it's "definitely" the case, but I am confident that's how I would claim it (and have done on multiple occasions).

        The expenses pass the wholly and exclusively test and aren't capital.
        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


          #5
          It is definitely the case. The purpose of the expense does not change between the first and the second purchase.

          If the purpose of any expense is to obtain finance then it is allowable, taking into the new restrictions which are coming up.

          Comment

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