Tax on BTL

berbatov10

For the tax year 2020 - 2021 I completed a SA.  Part of my SA was from 2 x BTL properties I own ( with mortgages).  Due to a tenant not paying his rent and leaving one in a dreadful state I had income of around £19000 from both properties but also costs of around £15000 to redecorate fit new bathroom and kitchen etc 

When I spoke to HMRC this week they said I have a carry forward loss of around £1710. 

I thought that expenses were 100% tax deductible am I missing something   

Dazed_and_C0nfused

Allowable expenses are.

Finance costs, particularly mortgage interest are no longer allowable expenses.

But irrespective of that £19,000 income less £15,000 expenses = £4,000 profit.

Not 100% clear what you think is wrong.

Grumpy_chap

If you have two BTL properties, you might be better engaging the services of an Accountant.

The tax treatment of expenses such as new bathroom or kitchen can spin on a pinhead whether treated as capital or revenue expenditure.

berbatov10

Dazed_and_C0nfused said:

Allowable expenses are.

Finance costs, particularly mortgage interest are no longer allowable expenses.

But irrespective of that £19,000 income less £15,000 expenses = £4,000 profit.

Not 100% clear what you think is wrong.

So excuse my ignorance. I am a basic rate tax payer so I thought that on my £19000 income I would pay £3800 in tax. 

I thought that the £15000 was 100% deductible as it was revenue expenditure to make the place habitable again so it would be offset against my £15000 I had to pay out 

Dazed_and_C0nfused

For the tax year 2020 - 2021 I completed a SA. 

What did you enter on the income from property page?

That is what your tax liability will be based upon.

Are HMRC investigating your return?

berbatov10

To give exact answers I had just looked at SA
Income from property 14705
Repairs                       13088
Rent/ins                         1170
Legal/management        2109  

Dazed_and_C0nfused

berbatov10 said:

To give exact answers I had just looked at SA
Income from property 14705
Repairs                       13088
Rent/ins                         1170
Legal/management        2109  

Which gives a loss of £1662.

Are you questioning the figures you used to self assess?

Did you have a loss to carry forward from the previous tax year?

Not really sure what you are asking

[Deleted User]

berbatov10 said:

To give exact answers I had just looked at SA
Income from property 14705
Repairs                       13088
Rent/ins                         1170
Legal/management        2109  

But you said in your first post that your income was £19000. Have you finance costs? When you look at the SA does it show a loss of £1682 at the end of the property section?

[Deleted User]

berbatov10 said:

Dazed_and_C0nfused said:

Allowable expenses are.

Finance costs, particularly mortgage interest are no longer allowable expenses.

But irrespective of that £19,000 income less £15,000 expenses = £4,000 profit.

Not 100% clear what you think is wrong.

So excuse my ignorance. I am a basic rate tax payer so I thought that on my £19000 income I would pay £3800 in tax. 

I thought that the £15000 was 100% deductible as it was revenue expenditure to make the place habitable again so it would be offset against my £15000 I had to pay out 

Excuse me if I am incorrect but are you suggesting that the tax on £19000 is £3800 and that you should be able to claim back £15000 less £3800? 

Grumpy_chap

berbatov10 said:

So excuse my ignorance. I am a basic rate tax payer so I thought that on my £19000 income I would pay £3800 in tax. 

I thought that the £15000 was 100% deductible as it was revenue expenditure to make the place habitable again so it would be offset against my £15000 I had to pay out 

Based on that part, I would say the £15k may well be capital and not revenue.

You need to employ an Accountant.

Jeremy535897

purdyoaten2 said:

berbatov10 said:

Dazed_and_C0nfused said:

Allowable expenses are.

Finance costs, particularly mortgage interest are no longer allowable expenses.

But irrespective of that £19,000 income less £15,000 expenses = £4,000 profit.

Not 100% clear what you think is wrong.

So excuse my ignorance. I am a basic rate tax payer so I thought that on my £19000 income I would pay £3800 in tax. 

I thought that the £15000 was 100% deductible as it was revenue expenditure to make the place habitable again so it would be offset against my £15000 I had to pay out 

Excuse me if I am incorrect but are you suggesting that the tax on £19000 is £3800 and that you should be able to claim back £15000 less £3800? 

OP appears to think that 100% relief means that the government picks up the whole tab for any expenses, so if you incur repairs of £15,000, you get £15,000 back from HMRC. People claiming tax relief on WFH costs often made the same mistake, assuming they would get £6 a week off their tax rather than £1.20. If that were the case, OP would logically have to give all the £19,000 rent to the government in the first place.

As to whether such expenses are revenue or capital, in these circumstances they would be revenue unless there was a significant element of improvement involved. See https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2030