First ever tax return - rental income?

vbt

Hi,

I have looked through various posts on MSE and also at the HMRC and Directgov websites but I can't find anything that specifically answers my questions so I'm creating a new post.

I had to relocate to London for work in January, meaning that I had to let out the flat that I own in Manchester. This means that I will need to complete a tax return.

I've never done a tax return before, but I have been looking at allowable and non-allowable expenses; as far as I can tell

• the service charge for the property is deductible
• the replacement costs for a brozen fridge-freezer and water heater timer are deductible (parts and labour)
• the fees I paid for letting the property are deductible, including the fee for protecting the deposit in a TDS

Also, from my research the wear and tear on furniture etc is not deductible.

Does anyone know if the above points are correct?

My final question is that as I have both rental costs in London, plus my mortgage costs in Manchester, can I deduct the cost of my rent or my mortgage as an expense against the rental income?

Also, I took out landlords insurance too - is this cost deductible?

In summary:
Mortgage cost pcm is aprox £700
Service charge aprox £120
Rent in London pcm (my share only) £650
New Fridge-freezer cost £350
Timer cost £100
Letting fees and TDS charge £175
Rental income £900 (9 month tenancy)

Grateful for any advice anyone has.

Thanks

phill99

You certainly can't off set the rent you are paying in London.

You can offset the mortgage costs, but only the interest part of your mortgage, not the capital repayments.

classy69

Also, is the property you are renting out furnished? If so, you can claim a wear and tear allowance of 10% of the rental income.

flora48

There is a useful page here on the Direct Gov site http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017814

Werdnal

I believe you can also use the cost of the EPC you arranged before letting, and if you have any gas applicances, therefore requiring a Gas Safety Certificate, the cost of this is deductable too.

As stated above, only mortgage interest is allowed. Your own rent does not come into the equation at all!

vbt

Thanks everyone - this is really helpful

Kynthia

If you look up allowable expenses for property income on websites such as directgov, HMRC and other landlord sites you should get some good info.

Your rental business is completely separate from your living costs and as others have stated the capital element of your mortgage repayments is not allowable too. Other costs that are wholly related to your rental business are allowable such as EPC, gas safety cert, letting agent fees, insurance, maintenance of the property, service charge/ground rent, etc.

As you are letting a furnished property you need to decide whether to claim the 10% wear and tear allowance. You can deduct 10% of your annual net rental income from your profit, which is for the furnishings including white goods, carpets, etc. However you then can't claim for the replacement cost of these items as they are covered in the allowance, so you need to decide which is better for you. You can't chop and change each year, once you decide which method to use you should stick to it. This doesn't include repairs so you can claim these either way.

Marie27lol

I will (hopefully) be in this position in about 2 months, so this thread and the info given is really useful.

Thankyou
M

Kynthia

I find it useful to keep a folder for each financial year and in it I place every document relating to the letting, eg the rent statements from the LA, invoices from traders, receipts, service charge invoice, gas safety cert, etc. I also keep in it anything else I need for my self assessment tax return such as my P60 and tax savings statements. I then use all this to record and group together on excel the income and expenditure into the types listed on the return. Doing all of this makes completing the return so much easier.

abankerbutnotafatcat

Allied question, if you had to put a new boiler in how would that be accounted for?

Werdnal

The rules can sometimes be a little vague, but if the boiler was fitted BEFORE the first let, it wouldn't be part of your letting expenses. Similarly, if you were improving an already working boiler with a new model, that would be classed as an "improvement" and similarly not included.

If the boiler failed during a let and you had to repair or replace, then the cost is allowable!