Understanding Self Employment – Landlords: What Can You Legally Claim for?

Owning property has always been seen as a good investment. For 34% of landlords in the UK, 2022 is looking to be a year for expansion and making the most of the rental market conditions that are pushing for more tenants, higher rental costs, and the ability to do more with their property.

But in the midst of all this, new landlords, or people who are seeking to make use of holiday let sites to generate extra income, might find it extremely difficult to work out what they can and can’t do with their properties, what they must or must not charge for, and how to keep track of it all for HMRC and the inevitable tax bill, so this article will answer, what can landlords claim for?

what can landlords claim for

Where Do You Get Taxed?

As a landlord, you’re going to get taxed at each stage of the property journey – when you buy the property, when you let it, and when you sell or pass it on; and like many other taxes – the amount you pay will be determined by what you’re earning – but in the case of buying the property, the charges will also depend on how much you’re spending.

For example, if you purchase a residential property for more than £40k when you already own more than one, then you will be charged Additional Rate, which applies to the full price for buy-to-let or second homes.

The percentage rate you pay goes up, the higher the cost of the property purchase, from around 3% (£125k) to 15% (over £1.5 million).

Once you’ve purchased the property and have started letting it out, you will be taxed on your annual rental profit (if it’s above £2,500). The amount of tax you pay will depend on your total income (whether you’re using your personal allowance, are on Basic Rate, Higher Rate, or Additional Rate).

If you decide to cease being a landlord and sell the property (or pass it over to someone else), you may have to pay Capital Gains Tax and make use of the Making Tax Digital (MTD) software to fill in the specific returns required by HMRC.

What can landlords claim for?

so what can landlords claim for? If you’re spending out on the upkeep, maintenance, and essential repairs for the building – it’s very important to keep copies of the receipts, and clearly note down what you’ve spent (and when).

When you’re spending on the building, and keeping it in suitable condition, these are property expenses, and the figure can be deducted from your end of year profits, which may reduce your tax liability.

These property expenses aren’t just limited to repairs either – activities relating to the business of letting it out, managing the upkeep, and maintaining the location are all considered allowable expenses.

When you start to work out what is allowable as an expense, it’s important to realise that there are property costs (such as council tax, ground rent, legal fees, contractor wages for repairs, etc), and business costs (such as phone bills, accountancy fees, and the other costs of actually administrating the business of letting out the property).

HMRC doesn’t have a definitive list of what is allowable, although they do have some good examples – seeking out advice and assistance to determine if an expense is allowable is advised, as you might be missing out if you only look at what has been specified, and don’t realise there are other expenses that count.

For example, HMRC doesn’t actually say anything about claiming for rental insurance, gas safety certification, smoke alarms, or expenses occurring on eviction (such as cleaning) – but all of these are actually allowable expenses, and should therefore be noted down, and claimed.

Reducing your tax liability could lead to a lower tax bill and give you more financial options to grow your business.

If you’re not sure that you’re claiming for everything you should be, need help with making sure that you’re compliant with HMRC regulations and your legal obligations, or just want to have a consultation with financial experts who can provide you with the information and services you need to make the best decisions for your business – then you should get in touch with our team today.

Our experts can help you work out what you need to be paying, when you need to pay it – and how you can legally reduce the amount you need to pay and make the best use of your money and all about what can landlords claim for. Find out how Yorkshire Accountancy can help you make tax less taxing.

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