by Ben Luxon July 24, 2019 4 min read

As a Landlord you are bound to rack up a whole host of expenses. Whether that’s from finding your tenants, property maintenance costs, the property management software you use like Landlord Studio, or the company your employ for property management or even if it’s just the cleaner you send in.

The good news is that a lot of these costs can reduce your tax bill at the end of the year. However, this is all the more reason to manage your accounting properly with a software like Landlord Studio.

Whilst this may sound all well and good. This process can be a bit complex, to say the least. In this article we outline the main things you need to be aware of, and detail how you can make the most out of the allowances and tax relief options available.

Related: A Landlords Guide to Making Tax Digital

What are the allowable expenses a landlord can claim?

rental income tax

Easily Manage your Expenses with the Landlord Studio App.

As a general rule a landlord can claim any of the expenses that are incurred from running and maintaining their property.

If the rent you charge covers utility bills, or council tax you will need to count this as part of your rental income and then deduct those costs as expenses.

The most common kinds of expenses landlords claim are as follows:

The expenses should be incurred wholly and exclusively as a result of renting out the property. Where only part of the expense meets that criteria you can deduct part of the expenses from your rental income.

For example, you let only part of your home, you would have to portion part of the expense.

For more information about what is an allowable expense consult your tax advisor.

Making Improvements to your Property

When it comes to making improvements on your property you can’t deduct these costs as expenses. For example, you add a conservatory or loft conversion which increases the value of the property. These aren’t deductible expenses unfortunately. 

You may though be able to use the costs of these investments to reduce your capital gains tax when you come to sell the property.

You will want to consult with a professional to discuss your options and what records need to be kept.

Property Allowance

The property allowance is a tax exemption of up to £1,000 a year for individuals with income from land or property. If you own a property jointly with others, you’re each eligible for the £1,000 allowance against your share of the gross rental income. You cannot use this allowance on income from letting a room in your own home under the Rent a Room Scheme.

Landlords' 'wear and tear allowance'

rental income tax

You used to be able to claim expenses for the wear and tear of items if you supplied your property furnished. For example, cookers, carpets, beds and televisions.  

The wear and tear allowance allowed you to claim a maximum of 10% of the net annual rent (income less expenses) each year.

This though has now changed. The government now allows you to claim tax relief on anything you spend on replacing what it labels as a 'domestic item.'

Crucially, this only applies to items you are replacing. You can't claim tax relief on the actual cost of kitting out a property for the first time with furniture or appliances. It can only apply when an item is genuinely replaced and no longer used in the property.

Find out more about the Landlord Wear and Tear Allowance

What is 'replacement of domestic items relief'?

The government lists a number of examples of what domestic items qualify for this new relief. These include:

  • Beds;
  • Carpets;
  • Crockery or cutlery;
  • Curtains;
  • Fridges, washing machines etc;
  • Sofas.

It’s also well worth noting that you can only claim like for like replacements. Meaning, if you buy a fridge for £500,  but when you come to replace it the same model is only £250. You would only be able to claim the £250 relief.

You can also claim for the cost of disposing items (usually electrical goods). 

How does this 'replacement of domestic items relief' work?

An example:

It’s the end of a tenancy and a few things are looking a little it shabby. You do a walk around and decide to replace the curtains £200, a washing machine for £250 (which also costs £50 to dispose of) and a new bed for £400. 

The total relief you can claim for is £200 + £250 + £50 + £400, which amounts to £900. 

This can be deducted from your annual rental income to work out your tax bill at the end of the tax year. 

We hope you found this blog interesting! However, do note that it should not be used as a substitute for competent legal and/or other advice from a licensed professional.

Call TN Accountancy on 01892 576 550 for professional tax advice on your properties.

Email: enquiries@tnaccountancy.co.uk

or visit their website at www.TNaccountancy.co.uk

rental income tax

Ben Luxon

"Ben is an author and real estate enthusiast. His interest in all things entrepreneurial has led him to work with real estate professionals all over the world, distilling their knowledge into articles and Ebooks. His love of travelling has taken him to over 10 countries in the last year, where he has sampled the craft beer of them all."


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