Buy to let - tax position for refurbishment?

soupdragon10

My daughter and I are in the process of finding a buy to let property together. We have seen a property today which will need work to bring it up to standard for letting - new wiring, decoration and the garden sorting, but is on for a very good price.

As we are doing this as a business venture rather than as our own home, what, if any, are we allowed to deduct tax wise for refurbishment?

I would add that I am already self-employed in another area of work and my daughter is employed paying standard rate tax.

kinger101

Anything which you are required to do to bring the property up to the legal minimum standard for letting is capital expenditure, and should be included in the base price of the property. This is only relevant for CGT purposes when you eventually sell it on. HMRC are also likely to deem anything that increases the value of the underlying asset as capital expenditure, but this is more of a grey area. Wiring is therefore likely to be capital. Any costs associated with purchasing the property (e.g. solicitors fees) are also capital.

For general decorating and maintenance of property, this is revenue expenditure, and can be deducted from income when calculating tax.

If letting furnished, you get a 10% of the rental as a deduction. But furnished means tenant can live there without providing their own furniture/white goods. A cooker and a coffee table won't count.

Finally, mortgage interest, letting agency fees, insurance, and other such recurring costs (e.g. gas safety certificates) are also deductable when calculating profits.

If you make a loss in any year (e.g., say for redecorating costs in the first year), this cannot be offset against other income, but can be carried forward against future profits on the same property.