Pre-trading expenses for rental income

claire111

Hi,

I purchased a house in Nov 2019, moved  into it from February 2020 until October 2021 and then let it. It was always my intention to let and I only moved into it temporarily due to covid and the property market.

I have expenses such as updating electrics, installing loft boarding, building fitted wardrobes, getting garden 'tenant ready', painting and decorating etc which were incurred before the tenants moved in. Can I count these as expenses for the 2021/22 tax year, should any of them be capital expenses, or do they not count at all ?

Many thanks

Claire

sheramber

https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income#allow-expense

If you carry out work on a property before leasing or renting

Some costs of work on a property before you lease or rent it will be capital expenses, and therefore not allowable expenses. This includes if you buy a property in a derelict or run-down state, and either you paid a substantially reduced price for it or it was not in a fit state for rental.

Any works done to put it back into a fit state for letting are unlikely to be repair works. They will be capital works as they will improve the property. The costs for these works will not be an allowable expense.

macman

However, upon eventual sale of the property, the OP would be able to set any improvement costs against any CGT due at that time?

claire111

Thanks - I think I understand that pre trading 'repair type' expenses such as painting/decorating can be used in the first year of expenses but pre trading capital expenses do not count to be used as capital expenditure upon the sale of the property unless they are costs like an extension or conservatory which add significant value to the property.

So pre trading expenses such as building a storage cupboard, planting trees for privacy cannot be used.

Jeremy535897

See https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2505

macman

Painting and decorating is maintenance. An extension, or installing CH would be an improvement, as it adds value. Building a cupboard is unlikely to add value.
Did you not investigate what could and could not be allowable against your eventual CGT bill before entering the BTL market?

sheramber

I doubt any work done before you moved in, rather than before you let it, would  be considered expenses for letting.

claire111

macman said:

Did you not investigate what could and could not be allowable against your eventual CGT bill before entering the BTL market?

 No it wasn't necessary.  Also I haven't entered the BTL market.

sheramber

claire111 said:

macman said:

Did you not investigate what could and could not be allowable against your eventual CGT bill before entering the BTL market?

 No it wasn't necessary.  Also I haven't entered the BTL market.

Not what your first post says.

I purchased a house in Nov 2019, moved  into it from February 2020 until October 2021 and then let it. It was always my intention to let and I only moved into it temporarily due to covid and the property market.

Mr.Generous

Most people associate Buy to let with mortgaged property, I think the OP might have bought it outright.