Rental expenses for landlords
Whether it is one house you’re renting out or several apartments, you’re considered a landlord if you let a tenant rent the use of one of your properties. Some landlords ask that their tenants pay directly to their bank accounts and come to an agreement on who pays the utility bills, while some use an agency to handle the letting side of things.
When calculating the income, you should use the bank transfers from the tenant if you rent directly. If you use an agency, they will send you monthly statements; you will need to pick out the total rent amounts from these statements and deduct the expenses that are also listed.
• The advertisement costs when looking for a new tenant. Your agency will include this on their invoices and include a tenancy agreement fee which can also be reclaimed.
• The cost of electricity, gas, water rates and council tax bills paid for the tenancy in the cases where the landlord pays for these bills directly.
• Maintenance costs incurred during the tenancy for the property, such as repair parts and labour, hiring a maid for an extensive clean or calling a gardener in.
• The replacement of fixtures and fittings, such as a radiator or a bed, are also allowable provided the new version brought is a similar make, model and value to the old version when that was new. You cannot claim the expense in improving an item, such as disposing of an old simple fridge for a fridge/freezer combination.
• Annual landlord insurance, and you may add content policies and building and content insurance.
• You will likely have driven to the building while empty for checking it over and carrying out repairs of your own. You can claim 45p per mile for travelling to and from your rented property to your main residence.
• For some properties you rent out you may find yourself charged with ground rents and service charges. These can be included in the expenses.
Previously, the cost of interest paid on a mortgage on the rented property was fully deductible. The rules for this have changed in the last few years and the amount claimable has reduced. In the 2018/19 tax return, which covers the dates 6th April 2018 to 5th April 2019, 50% of the mortgage interest will be deductible against rental income. In the 2019/20 tax year this claimable amount reduces to 25%, then from the 5th April 2020 the mortgage interest is no longer allowable as an expense.
If you did buy an improvement – such as upgrading the oven or adding a conservatory – this would be a capital expense and would not be allowable against the rental income. You can keep a record of these types of expenses for when you come to sell the property. The expenses will be set off against the gain you make on the sale.
HMRC will allow the cost of building an extension, the installation of a new security system and the replacement of a kitchen for a higher specification as allowable expenses on the tax return.
Rental Income, Rental Expenses, self-assessment, tax return, personal tax