Posted: 01 / 11 / 2016
When renting out a property the tax treatment depends on the kind of property you are renting out. The rules are different for; Residential properties, furnished residential lettings, furnished holiday lettings and commercial properties, which are all covered below.
When renting out a property you or your company must pay tax on the profits made after allowable expenses have been deducted.
What can be classed as an allowable expenses?
HMRC will allow you to deduct the cost of the following from your rental income;
• Letting agents’ fees
• Legal fees for lets of a year or less, or for renewing a lease for less than 50 years
• Accountants’ fees
• Buildings and contents insurance
• Interest on property loans *see proposed changes section below
• Maintenance and repairs to the property (but not improvements)
• Utility bills, like gas, water and electricity
• Rent, ground rent, service charges
• Council Tax
• Services you pay for, like cleaning or gardening
• Other direct costs of letting the property, like phone calls, stationery and advertising
Note that allowable expenses don’t include ‘capital expenditure’ – like buying a property or renovating it beyond repairs.
The tax treatment of commercial properties is similar to unfurnished residential property as outlined above. However, you can also claim plant and machinery capital allowances on some items if you rent out a commercial property – like a shop, garage or lock-up.