Property Rental Expenses

Zebra

I've a couple of properties that I rent out, doing all the management work myself from home.

When filing my tax return I claim for all the usual things - mortgage interest, repairs, insurance costs etc.

But what about all those unquantifiable expenses, such as mobile phones, pc's, cars etc, even pens and paper!

None of these items are used exclusively for rental purposes, but are there any rules of thumb to quantify them?

Thanks.

Gertie_Walker

No, there is no rule of thumb - everyone is differnet. HMRC will accept anything reasonable, so the trick is to not be too greedy, although no Inspector is going to ask for adjustments for tiny amounts.

Zebra

But what is reasonable?

I don't want to be greedy or claim anything that I'm not entitled to, but I don't know how to calculate the expenses without going to the nth degree.

For instance if my mobile phone costs £10 a month and my ISP £20 a month, I don't want to have to use a stopwatch to work out the proportion of time spent on rental business and private use - so would £5 a month be reasonable? What about the initial cost of the items?

If I said I spent £10 per month per property on expenses and consummables would that be considered reasonable?

I'd be interested in other peoples experiences and what they claim for.

Gertie_Walker

There is no definition of reasonable - everyone situation is different. £10 is a v small amount which no self respecting Inspector would challenge. The other way to work it out is to look at your phone bills before the lettings started and see how much they have increased by since then.

Zebra

Gertie_Walker wrote: »

There is no definition of reasonable - everyone situation is different.

I appreciate that, I'm just wondering what other people claim, and how they go about calculating or estimating it.

Gertie_Walker wrote: »

The other way to work it out is to look at your phone bills before the lettings started and see how much they have increased by since then.

I don't see what that would prove other than you were using the phone more or less.
Without timeing each and every phone call how would you work out the cost for business use and personal use?

chrismac1

My advice here is to look at your phone bill for a typical month and come up with a %. Let's say 48.5%. OK, so for the tax return keep this evidence and use 50% of the total cost of the bills for the year. Your point is a good one, not just for rentals but for apportioned expenses in general. Lots of people, most of my own client base included, use round % apportionment on bills.

Which is fine until the day the visitor from HMRC comes, when these are potentially an easy hit - "80% looks way too big to me, I say it should br 50%, show me why I should not disallow 30% of this cost item for the past 6 years."

And you then say, "Ah, but one month per year I look at the actual %. So here are the actuals for the past year, for example, which come to 77.8%. You can tick this to death if you like." 1-0 to the taxpayer!

Zebra

Thanks for all the replies - it's an interesting discussion point.

Take the following scenario:

You are Larry Landlord, landlord of three properties. After a busy day at the office, you get home and check your answering machine (£69.99 from Argos), along with a message from your mother-in-law and a couple of messages for your kids, is one from Tracey Tennant, a rather troublesome tennant in one of your properties, complaining of a blocked toilet.
You unplug your mobile phone (£55.90 from Carphone Warehouse and £15 a month on Vodaphone for unlimited texts and 100 minutes) from where it's charging (Npower 9.95p per kwh) and give Tracey a ring to let her know you're coming straight round.

Before you leave you grab your trusty old plunger (8 shilling and 6 from HandyAndys) and a bottle of bleach (£1.20 BOGOF Morrisons) from under the sink.
Putting on your coat and hat (£35 Matalan) because its peeing down outside, you drive the 7.4 miles to Tracey's in your family's Ford Focus (£12,500 from Carcraft).
On the way, you notice you're running low on petrol and call into your local Esso and put £20 worth of fuel in (114.9p per litre) thinking it will see you through to next payday.

On arriving at the property, you give the toilet a good old plunge, but ondoing so your expensive Rolex watch (£9 from Barnsley market) falls off into the toilet, swearing under your breath you rinse it and shove it into your pocket thinking to get it fixed later. With the toilet unblocked you squeeze a load of bleach into the toilet and leave in an even worse mood than when you arrived.

On the way home you decide to call into the Rose & Crown for a couple of halfs of best (£1.90 per pint) to relive you of the stress of dealing with such annoying tennants. You pay for your drinks and one for the new young barmaid and return home, now stuck in the rush hour so it takes you nearly twice as long as the first journey.

When you return home, and after returning the plunger and now half-empty bottle of bleach to under the kitchen sink, you make an entry in your leather-bound diary (birthday present from the wife) using an old bic biro (89p for 6 from Staples) you find lying about, and trudge up the stairs to the bedroom you use as a study, kicking the cat (free from RSPCA) on the way.

You plug in (Npower 8.49p per kwh as you've now on the cheaper tariff) your kids laptop (£299 from PC World), and make an entry in the Microsoft Excel (£69.99 Amazon) spreadsheet a friend designed for you (for a couple of pints and a cigar on a friday night).
Printing out the details on the old Epson colour printer, which never prints 'T' properly, but it was cheap (£25 cash from a man in the pub) and ink cartridges aren't too bad (£7.50 each for colour, £6.90 for black).

You then file the printout with the rest of your rental paperwork in your file that you keep in the drawer under your luxury double divan bed (£1,699.95 from EZ Beds), and fall exhausted onto the bed wondering whether it would be cheaper after all to let Eddie Estate Agent manage all your properties.

What can you claim from Tommy Taxman, and why?

HappyMJ

Zebra wrote: »

What can you claim from Tommy Taxman, and why?

Fantastic post by the way.

The only thing that really meets the wholly and exclusive test is the mileage at 7.4 miles times 2 rounded up to 15 miles at 40p per mile means a claim against income of only £6.

The rest is pushing it but I'd think you'd get away with a deduction of about £10 per month for incidentals without the need to prove too much.

Zebra

HappyMJ wrote: »

The only thing that really meets the wholly and exclusive test is the mileage at 7.4 miles times 2 rounded up to 15 miles at 40p per mile means a claim against income of only £6.

Not even one of the halfs of best then?

Is that 40p per mile a standard rate?

HappyMJ wrote: »

The rest is pushing it but I'd think you'd get away with a deduction of about £10 per month for incidentals without the need to prove too much.

I think that seems easier and more sensible even "reasonable".

HappyMJ

Zebra wrote: »

Not even one of the halfs of best then?

Is that 40p per mile a standard rate?

I think that seems easier and more sensible even "reasonable".

LOL.....the half of best can only be claimed if it required an overnight stay and with a meal. Don't know how you'd justify that at 7.4 miles away. hmmmm reminds me of the days when I was living on expenses...That was 2 years ago and I've still got some of the shampoos, razors and soaps left. I bought £5 per day of incidentals every night I stayed away and claimed it against the income I earnt.

The 40p is a standard rate for the first 10,000 miles per year then it drops to 25p per mile.

The £10 isn't that's up to you to justify which with your diary won't be hard.

Zebra

HappyMJ wrote: »

LOL.....the half of best can only be claimed if it required an overnight stay and with a meal. Don't know how you'd justify that at 7.4 miles away. hmmmm reminds me of the days when I was living on expenses...That was 2 years ago and I've still got some of the shampoos, razors and soaps left. I bought £5 per day of incidentals every night I stayed away and claimed it against the income I earnt.

The 40p is a standard rate for the first 10,000 miles per year then it drops to 25p per mile.

The £10 isn't that's up to you to justify which with your diary won't be hard.

Thanks for that.
And it's a leather-bound diary if you please.