FHL tax and expenses query.

Newheight13

I’ve done a lot of reading on this today and I have to say, it’s quite confusing! 

If I was to install new heating at a cost of 5k, does this mean that when I come to do my tax return, if I’ve made a net profit of 5k, the 1k tax I need to pay can be offset? Of so will the additional 4K be carried over to the following year? 

Thanks 

[Deleted User]

If your profit is £5000 your tax, at 20% , will be £1000.

If you now include the £5000 additional cost of the heating system as an expense, your profit will be NIL. Tax zero. 

The heating system is just another expense.

Jeremy535897

purdyoaten2 said:

If your profit is £5000 your tax, at 20% , will be £1000.

If you now include the £5000 additional cost of the heating system as an expense, your profit will be NIL. Tax zero. 

The heating system is just another expense.

Assuming the new heating system is just a replacement.

[Deleted User]

Jeremy535897 said:

purdyoaten2 said:

If your profit is £5000 your tax, at 20% , will be £1000.

If you now include the £5000 additional cost of the heating system as an expense, your profit will be NIL. Tax zero. 

The heating system is just another expense.

Assuming the new heating system is just a replacement.

Yes. I noted ‘new’ as opposed to ‘a’. 

Newheight13

So would the £4000 additional cost be carried over to following tax year? Thanks 

Jeremy535897

There isn't any remaining £4,000. You receive gross rents of say £6,000, and normally have rental expenses of £1,000. You take off the £1,000 from the £6,000 and pay tax at your marginal rate on the remaining £5,000. This year you replace your old heating system with a similar new one at a cost of £5,000. Instead of your expenses being £1,000, they are £6,000, which you deduct from the £6,000 gross rent, leaving no profit and no tax to pay, and nothing to carry forward.

Newheight13

Cheers Jeremy that’s great.