Learner Landlord - Basics

Property Tax

If you’re new to property investment and buy to let you’ll need to have a basic understanding of how the taxation system works. Simply put you will be taxed on your profits which is the difference in rental income less any allowable expenses.

What expenses are allowable?

• Legal fees
• Accountant’s fees
• Interest on buy to let mortgage
• Council tax
• Service charges
• Letting agent fees
• Travel
• Rent arrears
• Insurance
• Maintenance and repairs ( NOT Improvements)
• Other direct costs including:- advertising, phone, printing, relevant training

It’s usually best to get a qualified accountant to handle your tax affairs and to fill in the relevant self assessment. It’s important you notify the tax authorities as soon as you purchase your first property. Failure to declare income received is tax evasion.

There are certain costs that aren’t allowable such as capital costs such as furnishing, refurbs and any improvements made before you let the property. Repairs are claimable.
Depending on the type of property you are considering letting you may claim a ‘capital allowance’.

This relates to UK furnished let’s where you can offset 10% of the net rent as an allowance.
The alternative to the wear and tear allowance is the “renewals” allowance. This covers the replacement of furniture or equipment.

Your accountant would be best to advise which strategy is best suited to your own personal circumstances.

Once you start building a property portfolio it’s well worth the cost ( deductable of course) of having a look at some tax planning especially in relation to inheritance tax and capital gains tax mitigation strategies.