Getting my flat ready to let out . . . . what can I claim back tax-wise ?

Mehullakhani

Hey

Everyone. I am getting my flat decorated, re-carpeted etc. Just wondering what receipts, paperwork I need to keep for the tax man.

I realise that i only pay tax on the profits, i.e. income minus costs. But, I have this feeling that due to the place needing a lot of work, and also being ina low-rent area, i probably will not make any money in the first year.

Will this cause a problem with the taxman ? Also, do I need to keep every single receipt ? What other things can I claim back ? Petrol, as I have to keep driving back and forth, mobile phone bills ?

Thanks

Mehul

WiseInvestor_2

Huh? You want a tax rebate on a private investment? This country's gone mad!

Omertron

Keep all receipts. I'd claim for everything, but check out the self assesment form PDF for more details. It states: Repairs, Maintenance and renewals. I'd guess that you were covered

Tassotti

You cannot claim for improvements however. You can claim the interest on the mortgage (if there is one) back).

The whole improvement/general maintenance can be quite a grey area.

Mehullakhani

Ok, well I am not having improvements - the place is ex-council and has not been touched for 20 years

So I am having a new bathroom, carpets, paint etc etc - not as an improvement, but just to get it into a habitable state .

Does that count ?

R

Mehul

Tassotti

As I said, it is a grey area. If I were you, I would take pictures of the property in its current state (assuming you haven't already begun the works).

This way, if there are any questions in the future about your tax claims, you then have proof that the works done were necessities and not simply improvements.

Keep all receipts for everything

Mehullakhani

Phew - just checked my digicam - got lots of old pics of the flat, so should be okay.

This year, I have a feeling that I will not make any profit at all on the property - as the initial costs will be so high - will the IR cause any aggro ?

R

Mehul

Tassotti

Is this your main residence?

Are you moving away, travelling or buying a new place and renting this one out.

Do you currently have a mortgage on this property?

Sorry to ask so many questions, but the answers given will help people advise you of the best way to go about things.

lynzpower

Mehul, I think this is one for your accountant to look over in respect of your tax returns. A discussion with them is likely to be more fruitful than here I woud have thought, and thats what you pay em for?!?

MikeLB

You will get a 10% wear and tear allowance, which is 10% of your rental income. You can also claim for work / improvement which have been carried out whilst it is let, but i honest dont know what the situation is with money spent before it is let. I personally never claimed for work carried out before it was let, i think because it was too grey an area to be worth bothering with and trying to justify.

I know you can offset things like Solicitors fees, Mortgage Interest, Stamps and Stationary amongst others against the income from the rental. Your monthly mortgage payments on the capital will not count towards this offset.

If the income minus costs / expenses falls below a certain level you wont pay tax on the income. (I think this is about £4850) IIRC this is a good few thousand. So to claim anything back from the tax man you will probably have to put through a massive loss, and I suspect they will ask questions in that situation. But as some said above, best get some proper advice on this one.

You will also need to bear in mind the reason for letting this residence has a bearing, declaration of a main / secondary residence if you also own another flat, and subsequent Capital Gains Tax issues which that can lead too.

Mehullakhani

Ok, here is the full story

This is a flat which was left to me. I used it as a sort of temporary home, whilst I was away studying. Now I have bought another home, and this one is empty - so it is not my main residence anymore.

The flat will not be lettable, unless I get the works done, and I have reports from EA's etc to prove this. This is why I had the work done; bathroom etc etc.

It is going to be unfurnished, but the EA wants me to put in a washing machine and fridge. Can I claim these back against my income, and can I also claim back for say extended warranties, installation costs of these things etc etc ?

Thanks

Mehul