A quick Q about new tax rules for landlords.

thenap80

Hi.
I am on the cusp.of renting out my house out and have had a good few repairs and minor improvements done before it is let. These repairs etc were done in April.201y so this financial.year.

I now undertand that such work.is.tax deductable. But having never done a tax return I am left wondering what proof HMRC will need, if any, of wor done and costs. I do not have a receipt from handymen used. Will this cause problems. Have paid about 1.5k on work.done so a bit to be saved or lost!!

Thanks

HappyMJ

thenap80 wrote: »

Hi.
I am on the cusp.of renting out my house out and have had a good few repairs and minor improvements done before it is let. These repairs etc were done in April.201y so this financial.year.

I now undertand that such work.is.tax deductable. But having never done a tax return I am left wondering what proof HMRC will need, if any, of wor done and costs. I do not have a receipt from handymen used. Will this cause problems. Have paid about 1.5k on work.done so a bit to be saved or lost!!

Thanks

You are going to need at the very least an invoice to claim it is an expense for the work done so get one.

You don't need a receipt...just the invoice...the bill. You don't hand over any money until you get the bill. You need receipts for things purchased in the shops.

The invoice will show if the work was repairs and maintenance (expense - reducing your income tax) or if it was an improvement (capital - reducing your capital gains tax).

If you can't get an invoice you can't claim anything. If it's considered an expense 20% of £1,500 is £300 so yes it's a lot. If it's an improvement then 18% of £1,500 is £270 and that's a lot too and that's only if you're a basic rate taxpayer when you sell. It could be 28%.

thenap80

By invoice do you simply mean a receipt from the shops for materials. The guy came round having sorted all.bits n bobs out with his trade card and i just paid him a day rate. Can i get him to write me a handwritten receipt or will that not suffice? Does it have to be a legit company on headed paper??

I was under impression improvements were not tax deductable at all. For eg..If i do my bathroom up then that would be a renovation and therefore I cant include in my tax deductions? Am.I wrong?

Thanks

kinger101

Firstly, I assume this is a property you purchased to let, and you are not referring to improvements on somewhere which you used to reside.

You need to determine whether the expense is capital or revenue in nature. If the house was purchased in a dilapidated state and therefore could not be let (for example, because it had no bathroom) then this would fall within capital expenditure. You can't deduct if from rental income, but can add it to the base cost of CGT.

If the property could arguably have been let in the condition you purchased it, then I'd claim it as revenue. Essentially, the expenditure is treated as being incurred on the first day you start your letting business. This might mean you have a loss in year one, which can be carried forward and offset against profits from the same letting business.

It's possible what you have done is a combination of both capital and revenue.

You will need some form of invoice or receipt. The hand written one will be fine, but itemization is useful if there is an element of revenue and capital. I assume you didn't pay "cash for a discount". You can forget about him issuing anything if this is the case.

thenap80

It is my place which i lived in for ten years. Paid off mortgage and now want to rent it out.


So.if next march i do my tax return...i can put cost down of about 1.5k but without any real.proof that work.done????

HappyMJ

thenap80 wrote: »

By invoice do you simply mean a receipt from the shops for materials. The guy came round having sorted all.bits n bobs out with his trade card and i just paid him a day rate. Can i get him to write me a handwritten receipt or will that not suffice? Does it have to be a legit company on headed paper??

I was under impression improvements were not tax deductable at all. For eg..If i do my bathroom up then that would be a renovation and therefore I cant include in my tax deductions? Am.I wrong?

Thanks

Hand written receipt can suffice if the HMRC can identify who the supplier is. You need the traders name and address on it. It can be a sole trader but you need a list of what was done. You would normally find that on an invoice. A receipt just shows you've paid a sum of money it doesn't always say what for. Most shops provide itemized receipts which are acceptable instead of an invoice.

If you're replacing your old and tired bathroom that's maintenance and therefore an expense. It doesn't necessarily need to require replacement, as in broken, to count. Replacing an old bathroom suite to avoid future maintenance is acceptable.

If you're putting in a brand new bathroom where one did not exist before such as converting a bedroom to a bathroom or by adding an extension then that's a capital improvement and reduces your eventual capital gains tax payable.

HappyMJ

thenap80 wrote: »

It is my place which i lived in for ten years. Paid off mortgage and now want to rent it out.


So.if next march i do my tax return...i can put cost down of about 1.5k but without any real.proof that work.done????

Do you still live in it?

kinger101

thenap80 wrote: »

It is my place which i lived in for ten years. Paid off mortgage and now want to rent it out.


So.if next march i do my tax return...i can put cost down of about 1.5k but without any real.proof that work.done????

You cannot claim a deduction for historic expenditure if it was your residential property at the time. The reason being the expenditure needs to have been incurred "wholly and exclusively" for the purpose of the business.

thenap80

HappyMJ wrote: »

Do you still live in it?

No....it is vacant awaiting new tenants and am just fixing a few bits and making improvements.

I am still left wondering what i do if the handyman doesnt have a co. he works for and merely does it privately. Am i therefore not going to be able to claim it as an expenditure for HMRC purposes???

Beckyy

Did he do it as a cash in hand?

thenap80

Yeah....gave him cash....just a handyman with a card up. I could ask for a receipt i guess but am sure will.onky be o a piece of paper. No real company name i assume. Woukd that suffice.???