Advice about tax deductible costs for landlord please

Halle71

Hello

We are soon to be amateur landlords as we are in the process of buying our first buy to let property.

We have just had the survey back and, as expected, although there is nothing urgent, there are lots of smallish problems that need to be addressed in the next year or so. These include things like replacing a double glazed French door than has failed, a small area of damp and replacing the felt on the garage flat roof.

We don't want to go back to the vendor because we got a good price for the property, prices have gone ballistic in the area in the last three months and we have a tenant lined up who wants the house for three years. However, after reading that repairs are tax deductible I just wondered if things like this would be classed as repairs for tax purposes? We would only be replacing things that exist already but have come to the end of their useful life.

And advice would be welcome.

Thanks!

ognum

Good luck with your new buisness. First let me say there is no such thing as an amateur landlord, you are going to be a landlord like it or not!

If you are replacing what is already there and not making improvements then they are deductable, if you replace felt roof with felt roof then it is deductable if you put on a ridge and tiled roof then it's a capital but you need to wait until you have tenants in to start the improvements.

I would wait until you have tenants in then t

00ec25

ognum wrote: »

but you need to wait until you have tenants in to start the improvements.

I would wait until you have tenants in then t

No
for tax purposes you do not have to wait until tenants are in, This is known as pre commencement expenditure and for that the test is was the expenditure wholly and exclusively business related - see here for exact details
http://www.hmrc.gov.uk/manuals/pimmanual/pim2505.htm

based on the Op's post I will assume that the property is a BTL which the OP is not, and has never been, living in as their own main home, therefore by default any works to repair it would qualify as wholly and exclusively business related within the last 7 years, leaving only the question of capital v income related expense - and all the ones listed are undoubtedly eligible income tax related expenses not capital expenditure

ognum

You are correct Thanks

Halle71

Thanks both.
It is indeed a property we are buying as a btl and this news has come as a relief as I wondered where the money for repairs would come from. We are both in the 40% tax bracket with our salaries so this will help significantly as I suspect genuine repairs could use up most of our profit for a year, if not two. After reading the survey last night I had a bit of a sleepless night but I'm sure I'll sleep soundly tonight!

00ec25

Halle71 wrote: »

I wondered where the money for repairs would come from. We are both in the 40% tax bracket with our salaries so this will help significantly as I suspect genuine repairs could use up most of our profit for a year, if not two.

I'll take that as tongue in cheek - two salaries in higher rate bracket and you quibble about the costs of a few repairs

I'll also take as read you understand carrying forward losses against future profit not PAYE earnings :cool:

Halle71

Definitely not tongue in cheek. Surely your reply is though? Is this forum only for people earning under the 40% tax threshold?
I was asking for advice not charity.

As well as the repairs already mentioned, said repairs include replacing all double glazing which is coming to the end of its useful life as it is starting to mist, problems with the tiled roof as well as flat roofs on garage and loft conversion, problems with the render, blocked foul water drain.....
As is stands, after mortgage payments (interest only), monthly payments to my parents for their loan towards the deposit, and tax we stand to make about £150 per month which needs to be set aside for repairs etc. So the house will break even.

Yes we might be in the 40% tax bracket but this does not mean we are loaded or not allowed to take advantage if the tax breaks we are entitled to. We live in central London where the cost of living is high and, when I go back to work after mat leave, will have two kids in childcare. We do not have nursery places yet, but f/time nursery in Wandsworth is anywhere between £1200 and £1800 per month. There goes one of our massive salaries lol!!!

Your reply was unnecessary and bitter.

mjdh1957

I'm curious why you have made this investment and will be running a rental business if you are only 'breaking even'.

Money in the bank would seem to give you a better return, so why take on all this extra risk?

Halle71

For the capital investment. Our house is five minutes away and a similar size and, in the time since we had the offer accepted about three months ago, has risen about £25k in value and this shows no signs of slowing down. We live in a pocket of houses that were undervalued and in an unfashionable area but have just been discovered by 'Balhamers' who can't afford to live in Balham. We had money in the bank earning nothing, my parents had the same and wanted to help us so it was a no brainer.
We're also letting the house to friends for a long period and have reduced the rent accordingly.

Maybe it does seem greedy to some, but I work in a volatile industry (advertising) where job security diminishes rapidly after 40 so this could provide a vital nest egg in the future.

BitterAndTwisted

"Letting the house to friends".


Oh dear.

mjdh1957

BitterAndTwisted wrote: »

"Letting the house to friends".


Oh dear.

Indeed.

Lots of tales on here about now ex-friends with whom people entered into a business relationship.

So that's another risk to factor into your business plan.