Do you own a residential rental property? If so, it is essential for you to have an understanding of allowable property expenses. By familiarising yourself with these expenses, you can make informed financial decisions and reduce your tax liabilities.
What are allowable property expenses?
These are the costs you incur while renting out a residential property. You can deduct these expenses from your taxable income, which means you can reduce your tax liabilities and boost your overall profitability, who doesn’t love that? However, not all costs you may encounter will be allowable, so let’s explore what is:
Rent or Mortgage Interest: If you’re renting and sub-letting, or have a mortgage on your rental property, you can claim the rental payments or mortgage interest as allowable expenses, but keep in mind that mortgage capital repayments don’t count, unfortunately.
Repairs and Maintenance: Whether you’re fixing structural issues, dealing with plumbing or electrical work, or even just giving the place a fresh coat of paint, it’s all eligible.
Whilst you can claim maintenance and repair expenses, it’s important to note that improvements or enhancements that increase the value of the property are generally not allowable expenses. For example, if you renovate your kitchen worktop from laminate to granite.
Insurance: Insurance premiums for your residential rental property are allowable expenses. Whether it’s building insurance, contents insurance, or landlord cover, you can claim them all.
Utilities: If you pay for the property’s electricity, gas, water, or internet services, you’ll be happy to know that these expenses are generally allowable. However, if these costs are paid directly by your tenant then you cannot claim these against your property income.
We’ve only covered a small portion of these expenses, so we’ve put the rest into an easy, FREE pdf download for you to refer back to at any time:
Free PDF download of allowable property expenses (June 2023)
You must keep complete and accurate accounting records for any allowable property expenses, including copies of receipts/invoices.
Make sure you separate your personal and business expenses clearly, to avoid any confusion during tax audits or assessments. And remember, staying in the loop with the latest rules and regulations is key, but it’s always a good idea to reach out to tax professionals for guidance.
Disclaimer: The tax rates and reliefs mentioned in this blog were correct at the time of posting (June 2023) and have not been updated for any future changes in tax law or HMRC practice. The contents of this blog have been produced as a helpful reference point and the information provided should be used as a guide only. You should discuss your specific circumstances directly with us before taking any action based on the information included in this blog.
Looking for more accounting tips? Click here for 5 things to should do, before the new tax year