Rental Tax Deduction

[Luigi]

Just wondering if we can deduct tax from rental income for solicitor fees, stamp duty, property survey cost, etc. paid to buy the property. Thanks.

[Richlist]

Assuming its a property that you have bought specifically to let then yes BUT some expenses are revenue items that apply to income tax and some expenses are capital items that apply to capital gains tax. You will probably need to ask for an itemised breakdown.

Here is my breakdown:

Revenue......offset against income tax. You should total the following items and divide by the term of the mortgage. You then claim that amount each year until the end of the mortgage term. You need to keep records & receipts in case HMRC want to verify your claim.

* Mortgage application fees

* Land registry

* Valuation fees

* Searches required by lender (eg local search, drainage search etc)

* Managing agents/ freeholders fees (for leasehold property)

* Redemption/ sealing fees (remortgages)

* Bank charges / telegraphic transfer fees(CHAPS etc)

Capital......offset against future capital gains tax. You should keep records and reciepts of these costs in order to use them to reduce your CGT bill when you eventually sell the property.

* SDLT ...Stamp Duty Land Tax (often incorrectly called stamp duty)

* Searches required by purchaser

* Solicitors fees

* Managing agents/ freeholders solicitors fees (for leasehold property).

[Chestnut]

HMRC Tax Return notes 2011 state under "Expenses allowable for tax":

"Exclude the legal and professional expenses of a first letting, if it is for more than one year."

[Richlist]

......and your point is ?

1. The notes are a guide. If you don't understand you can always talk to them.....they do speak English.....of sorts.

2. Most landlords DO NOT let property for more than one year so that note doesn't apply.

3. Elsewhere you will find notes that tell you that any expense associated with the financing of a BTL are an allowable expense. All of the revenue expenses I have listed are specifically required to raise finance for the purchase of the property.

[Luigi]

Thanks for sharing your opinions. I think between guideline and practice, there is always room up to interpretation.

Richlist - Your breakdown makes sense to me.