Rental Income - Tax allowances and deductions

bruceandme

I just wondered if anyone knew what "allowances and deductions" you are able to claim for when doing a tax self assessment? I know most of them:
Agent fees
Interest on the mortgage loan
10% Wear and tear allowance (or replacement cost if not claiming wear and tear allowance)
Costs etc.

My query is can I deduct the cost of having the roof repaired on the property I let out? Is it an allowable deduction?

Rolo_Tomasi

Any repairs to the property would be an allowable deduction against rental income however improvements would not - you get tax relief for these when you sell the property. Assuming the roof has just been repaired and not improved in any way then the cost should be allowable.

The wear & tear allowance is only available for furnished properties.

James_Trimby

Repairs v capital is always difficult. lots of court cases etc over the years with lots of different interpratations. (excuse spelling I cant get spell check to work!) Basically for rental income purposes (business property rules are different) you look at the state of the building when you purchase it. Anything that improves it from this state is not allowed for income tax but is for eventual capital gains tax on disposal. Anything that keeps it in same state is repairs.

There are lots of funnies (eg double glazing replacing single glazing is generally allowed) Generally this means any costs incurred before renting are improvements and any after starting to rent need reviewing. The longer the time period between starting and the costs of works the better your chances. If this is your first year a roof repair looks like improvements BUT if damaged in a storm etc that wasnt insured could still be a repair. IF it is in the grey zone one option is to allow a % to each (improve/repair) IF queried by Revenue it is alot harder for them to argue % than it is to argue yes/no Also even if you lose you can still argue that you were being reasonable (to avoid/reduce penalties).

Pennywise

Following on from the earlier post, it is generally better to do as little to a property as you can get away with when you first rent it out - just do the bare minimum to be legal and accept a much lower rent for the first tenant. After they've been and gone, then you can do the "repairs and maintenance" to make it a more attractive property to get a higher rent for the next tenant. By doing it this way, there is less opportunity for HMRC to argue "capital" treatment of your doing-up costs as a matter of fact, it was in a state to be rented out because that's exactly what happened! If you spend a load of money doing it up before renting it out you're at far greater risk of HMRC enquiry and even if you're absolutely right in your interpretation of capital versus revenue expense, you'll have a long and bumpy road to get the tax inspector to give up his challenge. Also wise to take "before and after" photos, keep all paperwork, quotes, etc from professionals, tradesmen, estate agents etc., to have absolute proof of what you've done and why you've done it. Remember that you need to keep the paperwork for purchase/improvements until after you sell it, the 6 year time period starts at the date of sale, not the date of purchase!