It’s the end of the tax year and your buy-to-let property has given you a nice profit from its rental income. Now you’ll want to offset the tax on that profit with the buy-to-let allowable expenses you have incurred while renting the property.
So far so good. But you need to make sure that these expenses were wholly and exclusively for the purposes of renting out the property. This means that if an expense wasn’t incurred for the purpose of your property rental you can’t offset the cost against the rental income.
Buy-to-let allowable expenses and non allowable expenses – those expenses you CAN claim a deduction for include:
- general maintenance and repairs to the property, but not improvements (such as replacing a laminate kitchen worktop with a granite worktop)
- water rates, council tax, gas and electricity
- insurance – landlords’ policies for buildings, contents and public liability
costs of services, including the wages of gardeners and cleaners
- letting agent fees and management fees
- legal fees for lets of a year or less, or for renewing a lease for less than 50 years
- rents (if you’re sub-letting), ground rents and service charges
- direct costs such as phone calls, stationery and advertising for new tenants
- vehicle running costs (only the proportion used for your rental business)
Buy-to-let allowable expenses and non allowable expenses – those expenses you CANNOT claim a deduction for include:
- mortgage interest. You will be given an automatic deduction for this against your tax at basic rate but since 6th April 2020 it is no longer allowable for higher rate tax relief.
- private telephone calls – you can only claim for the cost of calls relating to your property rental business
- clothing – for example if you bought a suit to wear to a meeting relating to your property rental business, you can’t claim for the cost as wearing the suit is partly for your rental business and partly to keep you warm – no identifiable part is for your property rental business
- personal expenses – you can’t claim for any expense that was not incurred solely for your property rental business
Claiming part expenses
You might incur an expense of which only part is for your property rental business. If a definite part of a cost is an expense that is incurred wholly and exclusively for the property business, you can deduct that part.