reph4444 Posted January 23, 2013 Report Share Posted January 23, 2013 hope someone can help had a nasty surprise recently when i found out that you can't offset your mortgage against tax, only the interest :-( As such looking for any opportunities/suggestions to help me recover whatever else i can so that i'm not hammered by the tax man I'm advised that I can offset building repairs etc, but as i did a lot of the work myself, not sure what I can claim for my labour/materials etc :-( Any help much appreciated Regards.... Link to comment Share on other sites More sharing options...
chickpea Posted January 23, 2013 Report Share Posted January 23, 2013 Richlist has written a really comprehensive list on another post on this subject - which includes things like using your home as an office,mileage costs etc. I'll try to find it and add a link. Can I tag another question onto yours? - what counts as "maintenance" and what counts as "improvement"? For eg. we replaced some carpets in our rental property before the first tenants moved in - maintenance or improvement? And in the case of replacing a rubbish, wobbly tap for a new one - improvemement, and therefore not tax deductable? Thanks. Link to comment Share on other sites More sharing options...
Carryon Regardless Posted January 23, 2013 Report Share Posted January 23, 2013 Reph, materials are no problem, but if you want your labour to be allowed for tax benefit don't forget to declare that labour charge as profit so you can be taxed on it. Tracey, not absolute but costs applicable to preparing (renovating) a property before the 1st rental are considered to be offset against capital gains, calculated at disposal. Replacents that aren't 'capital' improvements are set off against annual revenues. A 'new' wobbly tap won't have improved the value of the property. Link to comment Share on other sites More sharing options...
chickpea Posted January 23, 2013 Report Share Posted January 23, 2013 Thanks Cor. We spoke to a rather grumpy chap at the tax office this morning but he wasn't very clear or helpful. Going on what you posted, I'm guessing things like lampshades and blinds put in before the first tenants aren't tax deductable (although they don't improve the value of the property)? It seems more obvious with things like new paint, wallpaper, tiles, flooring etc but I've included new front door keys and replacement screws etc. It adds into a big loss, without any of the questionables included :-( but as it's out first self assessment for rental AND the first years hubby is doing it without using an accountant, I'm aware HMRC will have us in their sights and it needs to be absolutely watertight and faultless. Link to comment Share on other sites More sharing options...
Richlist Posted January 23, 2013 Report Share Posted January 23, 2013 Can I tag another question onto yours? - what counts as "maintenance" and what counts as "improvement"? For eg. we replaced some carpets in our rental property before the first tenants moved in - maintenance or improvement? Not allowable for income tax. The cost may be able to be used in the future to reduce CGT if you sell the property with the carpets. And in the case of replacing a rubbish, wobbly tap for a new one - improvemement, and therefore not tax deductable? Any replacement or repair that uses parts that are the same, similar or a modern equivalent can be offset against income tax. Link to comment Share on other sites More sharing options...
Richlist Posted January 23, 2013 Report Share Posted January 23, 2013 Reph, materials are no problem, but if you want your labour to be allowed for tax benefit don't forget to declare that labour charge as profit so you can be taxed on it. Thats correct but totally pointless as you will save tax on the rental income and pay the same back through personal income. Link to comment Share on other sites More sharing options...
Carryon Regardless Posted January 23, 2013 Report Share Posted January 23, 2013 Te he Link to comment Share on other sites More sharing options...
reph4444 Posted January 24, 2013 Author Report Share Posted January 24, 2013 Thanks Richlist/Cor/Tracey, this is definitely turning into a minefield and appreciate you finding the time to help as this is my first, maybe my last :-( I assume I can offset the following:- receipts from builders B&Q receipts for materials bought Gas/Electricity test certificates Mortgage 'Interest only' costs Buildings Insurance Carpets/laminate floor as there were none in (or damaged) before House alarm installation Cost of gas/electricity used whilst house was being renevated I believe I should also be able to add any costs year on year for above plus any repairs to make life easier the following year? But no real effective way of claiming back for my own time, travel etc.. :-( Thanks in advance for your help Regards.... ps if anyone can direct me to the comprehensive list Richlist has already put together would be much appreciated :-) Link to comment Share on other sites More sharing options...
Chestnut Posted January 24, 2013 Report Share Posted January 24, 2013 "I assume I can offset the following:-..." No! You should consult HMRC guidance. As I understand, any capital costs incurred before tenancy starts (most of your list above) are only offsettable against CGT when you finally sell. Ongoing annual costs when tenancy is running, like insurance premiums and repairs, can be deducted from rental income before tax. HMRC would explain in guidance notes and/or on the tax form difference between 'maintenance' and 'improvements'. Don't assume anything! Link to comment Share on other sites More sharing options...
Carryon Regardless Posted January 24, 2013 Report Share Posted January 24, 2013 However you might try your own time isn't deductible as there is no expense. Recording mileage for each business related trip is one way to claim the 'allowable' expense, and most likely the most beneficial unless you have a new(ish) motor. Learn a little of the difference between capital costs and running costs (offset against revenues) and your on your way to understanding how to categorise each costs. The interest on any loan is an expense, the repayment is actually putting money in your own pocket, in theory, eventually, so not an expense just a cash flow consideration. Link to comment Share on other sites More sharing options...
Richlist Posted January 24, 2013 Report Share Posted January 24, 2013 Carpets/laminate floor as there were none in (or damaged) before Definitely not to be claimed against IT. Might be able to offset against future CGT when property sold. House alarm installation Thats an improvement so can't be claimed against IT......can be offset against future CGTCost of gas/electricity used whilst house was being renevated Definitely not.....property had not yet become part of your business Your time.....can't be claimed. Travel costs......usually claimed at 45p per mile Link to comment Share on other sites More sharing options...
Richlist Posted January 25, 2013 Report Share Posted January 25, 2013 Here's one of the lists that you might find usefull.....I can't find any of the others: Here's a list of what I believe can be offset against IT & CGT when property is bought. The principle is that you can claim those costs against IT that are specifically associated with arranging finance for the purchase of the property. IT * Searches (only if required by lender) * Mortgage application fees * Redemption fees * Managing agents fees * Bank charges/ telegraphic transfers etc * Land Registry fees * Valuation/ Survey fees (only if required by lender) * Fee charged for using an alternative buildings insurer CGT * Solicitors labour charges inc vat * Stamp Duty Land Tax * Valuation/ Survey fees (only if required by purchaser) * Searches (only if required by purchaser) * Estate agent fees Don't forget to also keep the following records/ receipts/ invoices: * Income Tax * Capital Gains Tax * Capital Expenditure items * Car Mileage/ running costs Complicated this tax business aint it ?.......hardly anyone treats it with the respect it deserves or puts the effort required into minimising their tax liabilities. I have concluded over the years that most landlords are so well off they don't need to ensure they claim all of their tax allowances. Getting an accountant IS NOT necessarily the answer either. Link to comment Share on other sites More sharing options...
chickpea Posted January 25, 2013 Report Share Posted January 25, 2013 Can you claim ALL bank charges and interest, eg those charged for going overdrawn, even if it was perhaps mismanagement on your own part? Also, we got cash back on our BTL mortgage - I assume I need to put that down as income? One final question - I read on the HMRC site that losses can only be carried forward to the same business. That's not true of profits, though, is it? So, hubby is self-employed in another line of work, but any profits from our BTL will be added on to the profits from that business to make a sum total for tax purposes? Seems a bit...unfair. Link to comment Share on other sites More sharing options...
reph4444 Posted January 25, 2013 Author Report Share Posted January 25, 2013 sob sob, it sounds like the deeper you delve the darker this gets and the more likely I am to end up out of pocket :-( Thanks again to all for your continued help If the builders work was to fix a damp problem and/or leaking roof etc.. and then the subsequent making good can that be claimed through IT as I would suggest this is maintenance? Also if the alarm was to fix an existing one that didn't work, can that be classed as maintenance and recovered via IT? As for mileage, I assume I can charge for all visits I make to the house when carrying out repairs or is it only recoverable if I'm there to show clients arounds/meet with builder etc..? Apologies, but not sure I understand the relevance of whether my car is new or not (btw its a 56 plate) Finally (for now) assume I can claim back each year for cost of Gas/Elec certificates? Think I'm clutching at straws!! Thanks in advance for any responses Link to comment Share on other sites More sharing options...
Richlist Posted January 25, 2013 Report Share Posted January 25, 2013 If the builders work was to fix a damp problem and/or leaking roof etc.. and then the subsequent making good can that be claimed through IT as I would suggest this is maintenance? If the work was carried out before the property was let then you can't claim any of it fot IT. Also if the alarm was to fix an existing one that didn't work, can that be classed as maintenance and recovered via IT? Same comments as above. As for mileage, I assume I can charge for all visits I make to the house when carrying out repairs or is it only recoverable if I'm there to show clients arounds/meet with builder etc..? It depends on wether you have a lettings agent. Apologies, but not sure I understand the relevance of whether my car is new or not (btw its a 56 plate) Me neither. Link to comment Share on other sites More sharing options...
Richlist Posted January 25, 2013 Report Share Posted January 25, 2013 Can you claim ALL bank charges and interest, eg those charged for going overdrawn, even if it was perhaps mismanagement on your own part? My post specifically refers to the costs of purchase. Link to comment Share on other sites More sharing options...
chickpea Posted January 25, 2013 Report Share Posted January 25, 2013 My post specifically refers to the costs of purchase. Ah, I see. I thought you might be including the running costs of a dedicated bank account for the properties. Link to comment Share on other sites More sharing options...
Richlist Posted January 25, 2013 Report Share Posted January 25, 2013 Its quite easy to operate a dedicated bank account specifically for your residential property rentals at zero running costs eg you could try First Direct....there are others. Link to comment Share on other sites More sharing options...
Chestnut Posted January 26, 2013 Report Share Posted January 26, 2013 The age of car has little relevance other than whether you gain or lose against HMRC's 45p/mile rate. 45p/mile is the highest allowable charge currently set by HMRC without taxing your car allowance as a benefit (perk). Newer cars, according to Gov, are more efficient and, depending on size, may cost a bit less than this. But by my calcs. an old car that has zero depreciation is cheaper still - until an expensive part gives out ! Link to comment Share on other sites More sharing options...
Richlist Posted January 26, 2013 Report Share Posted January 26, 2013 The age of car has little relevance other than whether you gain or lose against HMRC's 45p/mile rate. I think you are missing the point originally made by COR ...... There are two ways of claiming travel costs from your property rentals. * One way is to claim 45p per mile and * The other is to claim capital allowances using a writing down allowance system accepted by HMRC. In this second case the age of the car (and its corresponding value) play a critical part in how much you can claim. Link to comment Share on other sites More sharing options...
Antnkel Posted January 27, 2013 Report Share Posted January 27, 2013 Here's one of the lists that you might find usefull.....I can't find any of the others: Here's a list of what I believe can be offset against IT & CGT when property is bought. The principle is that you can claim those costs against IT that are specifically associated with arranging finance for the purchase of the property. IT * Searches (only if required by lender) * Mortgage application fees * Redemption fees * Managing agents fees * Bank charges/ telegraphic transfers etc * Land Registry fees * Valuation/ Survey fees (only if required by lender) * Fee charged for using an alternative buildings insurer Have the rules changed? As I thought you couldn't offset buying costs against rental income? When I first started letting out I bought a few different books to help. One of them was Which Tax Handbook 2010/2011 which states that any expenses involved with buying and selling, such as legal fees and survey costs are not allowable. I've bought two houses since and haven't used any of the charges/fees against rental income recieved so would be happy if I could. Link to comment Share on other sites More sharing options...
Richlist Posted January 27, 2013 Report Share Posted January 27, 2013 The rules haven't changed as far as I'm aware.......for income tax you have always been able to:- 1. Claim the costs associated with arranging finance for the purchase of a rental property. 2. Claim those costs imposed by the lender of that finance arrangement. All of the items on my list of allowable costs for income tax are there because the costs are required to support the lenders requirements. Most of the ''big ticket' costs of buying & selling...... usually comprising of stamp duty land tax, estate agents fees, solicitors labour charges etc etc......are not on the IT list but are on the CGT list. Does that exlanattion help you ? Link to comment Share on other sites More sharing options...
Antnkel Posted January 27, 2013 Report Share Posted January 27, 2013 So could I claim for arrangement fees against my income tax aswell? Link to comment Share on other sites More sharing options...
Richlist Posted January 27, 2013 Report Share Posted January 27, 2013 Aren't arrangement fees often added to the loan so you haven't actually paid a lump sum......just increased your interest payments ? But if those arrangement fees are paid as a lump sum and are a requirement of granting the finance then the answer has to be yes....you'll probably need to amortise the cost over the term of the loan eg......£1000 arrangement fee for a 10 year mortgage = you claim £100 per year for the 10 years of the mortgage. I think its box 26 on the self assessment tax return form that you will need to enter the figures. Link to comment Share on other sites More sharing options...
Antnkel Posted January 27, 2013 Report Share Posted January 27, 2013 Thanks, that does help. Link to comment Share on other sites More sharing options...
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