Electricity Standing Charge an allowable expense?

ganda2000

I have owned a plot of land for 5 years containing a small outbuilding.  During the tax year 2024/2025, I received an unexpected electricity standing charge bill for £4000 which I paid (no electricity was consumed).  I was not aware of a live electricity supply until I received the bill.  I let the land to a local builder for 12 months and received rental income of £1000 which was declared as income on my tax return.  I also paid £300 in the tax year 2024/2025 to get the meter removed to prevent further bills.

 Question is which of the following would apply to the 2024/2025 tax return.

 

1. The full £4000 standing charge can be used as an allowable expense.
2. The £300 meter removal charge can be used as an allowable expense.
3. An allowable expense of 1/5th of the standing charge could be used.  i.e. whilst the builder was occupying the land.
4. Any of these expenses cannot be used as allowable expenses.

 

Also, if the land was disposed of, could any of these expenses be offset against the capital gains.

Thanks for your help.

poseidon1

It seems to me your entire landlord outgoings of £4300 should be tax deductible against your rental income to produce a £3300 allowable loss to offset against future rental income.

If your £1000 rental income remains static in future years, no tax to pay for at least 3 further tax years. Once those losses exhausted remember you also have a tax free personal rental allowance of £1000 which can be claimed where you have no other rental expenses - see link below

https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

Indeed,  ( as explained in the link) if you are confident that rents will not increase in future years ( so 2024/25 loss not required), there is no necessity to even declare the rent received in view of the tax free allowance..


EDIT:

If you were unaware of the £1000 tax free allowance, and paid tax on the income over your period of ownership, you can go back 4 tax years and claim the allowance to obtain a retrospective tax refund. Probably best to do this by way of letter to HMRC.

This would be in addition to your loss claim for 2024/25, although for the reasons stated above, you might decide there is no need to make the claim at all.

Isthisforreal99

poseidon1 said:

It seems to me your entire landlord outgoings of £4300 should be tax deductible against your rental income to produce a £3300 allowable loss to offset against future rental income.

If your £1000 rental income remains static in future years, no tax to pay for at least 3 further tax years. Once those losses exhausted remember you also have a tax free personal rental allowance of £1000 which can be claimed where you have no other rental expenses - see link below

https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

Indeed,  ( as explained in the link) if you are confident that rents will not increase in future years ( so 2024/25 loss not required), there is no necessity to even declare the rent received in view of the tax free allowance..

Why, when the bill covers a 5 year period and the land was only let in 24/25.

mybestattempt

Isthisforreal99 said:

poseidon1 said:

It seems to me your entire landlord outgoings of £4300 should be tax deductible against your rental income to produce a £3300 allowable loss to offset against future rental income.

If your £1000 rental income remains static in future years, no tax to pay for at least 3 further tax years. Once those losses exhausted remember you also have a tax free personal rental allowance of £1000 which can be claimed where you have no other rental expenses - see link below

https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

Indeed,  ( as explained in the link) if you are confident that rents will not increase in future years ( so 2024/25 loss not required), there is no necessity to even declare the rent received in view of the tax free allowance..

Why, when the bill covers a 5 year period and the land was only let in 24/25.

The OP is clear that the land was let for only 12 months for £1000 although the tax year(s) involved not specified.

I have read the previous thread about the arrival of the unexpected bill for the standing charges and removal of the electricity meter but it's not clear whether this was after the letting had ceased.

My thoughts are that it could/might be argued that none of the expenditure was incurred "wholly and exclusively" for the purposes of the property income business as it played no part at all in "earning" the rental income.

However, in any event, the rental income would attract the £1000 property income allowance, which would be more than a fifth of the bill.

The removal of the meter is not a repair nor is it allowable capital expenditure as it did not enhance the value of the land and outbuilding on it.

ganda2000

Thank you for your replies.   In order to clarify the information that I originally posted.  I claim property income from other residential properties therefore the £1000 property income allowance is not applicable.  The land was let in a previous tax year to when the unexpected expenditure occurred.  The electricity standing charge covered 5 years. I.e. 3 years before receiving rent and 1 year after receiving rent.