How To Maximise Your Tax Expenses For A Rental Property

Any landlords out there letting residential properties will be well aware of the income tax they will have to pay on the money earned from the rent, the more rent received the more in tax to be paid.

What is interesting though is that the beloved HMRC actually view what you are doing as running a business, specifically a property business and as such there are a number of expenses that you can offset against any income tax levied. See how you can get the most out of your property by minimising your tax bill.

Tax allowances you can claimNo matter how many properties you let, the expenses you're entitled to do not change. When the time comes to filing the self assessment tax return, you must put the gross total rental income (total rental income, no matter if it's profit or not) and then list your deductable tax expenses. The end result is paying tax from the profits after all expenses have been accounted for, so what expenses can a landlord claim for?

The Landlords Guide to the Top 5 Expenses You Can Offset Against Tax No1. The cost of insurance and your mortgage payments If you have taken out a commercial mortgage, or other form of commercial property finance to purchase the property, then interest on this loan can be offset against the rent you receive. You are unable to claim back any payments that go towards paying off the capital. You can also claim for insurance expenses, for example, your buildings and content insurance.

2. Utility billsThe majority of your tenants in today's society cover the utility bills of the property themselves, as defined in their tenancy agreement. However, should the landlord have responsibility of covering the property utilities, such as gas, electric or water, then they can be reclaimed as allowable tax expenses.

3. The money you pay out for professional servicesThere are various professional expenses that can be offset against rental income too. Accountancy fees (ironically) and legal fees all fall within this bracket. To find out exactly what professional fees you pay, check with HMRC online.

4. Maintaining the propertyHouses need maintaining and let properties often need more upkeep than others. The cost of this is an allowable expense. However home improvements are not, the activity has to be a repair, so adding a conservatory would not be considered.

5. Management CostsWhilst renting your property through a letting agent can hold various benefits, such as ensuring you are paid even if the tenant fails to pay rent, it can also be quite costly. Most agents will charge you for finding a tenant, not to mention a monthly charge for the privilege of having them manage your property. The best thing about these expenses though is that you can offset them against your rental income.

Other expenses you can claim for include the costs of advertising your property, any cleaning, work done on the garden and service charges or ground rent.

Filing your tax return: So now it's the time to complete that dreaded tax return but hopefully taking into accounts the above points it shouldn't be so heartbreaking! You will need to include the total amount of rent you have received in the period along with the total amount of allowable tax expenses.