News
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Taxing Issues
February 19th, 2010
As the leading letting agents in Durham, we are often asked about what landlords can and can not offset against rental income in respect of a residential property. This can be a complex area and we would always recommend that landlords seek specialist tax advice.
However, there are certain rules of thumb in response to some of the most common questions. Generally speaking, anything that could be regarded as a capital investment rather than an operational or maintenance cost can probably not be immediately offset against taxable income in its entirety.
For example, you might think that it would be quite reasonable to assume that the cost of furniture can be set against tax as it is necessary for a furnished let. However, whilst the initial cost of furniture and fittings may be allowable against capital appreciation, it can not be offset against annual revenue, nor can any general improvement you make to the property. Nevertheless, the cost of any repairs or maintenance of these capital items may be claimed. Alternatively, a wear and tear allowance of 10% of the rents received may be deductible.
So long as you rent out your Durham property for at least 26 weeks a year, then you should be able to deduct the interest on any loan used to buy the property (but not if the property has subsequently been remortgaged for other purposes). However, any capital repayment element of your mortgage can not be claimed in this way.
Generally speaking, if an expense happens once, then it is regarded as a capital input, but if it is ongoing, such as insurance, interest, letting agency fees, white goods replacement, repairs or bi-annual redecoration, then this would constitute an operational cost and as such may be taken account of against rental income in your annual tax return.
Perhaps it’s not quite so complicated after all!
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