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Making your properties tax efficient

Making your properties tax efficient

Against the rental income of furnished residential properties, you can offset a significant amount of the ongoing expenditure, including:-

  • Pre-trading expenditure may be incurred before trading actually starts. So long a it is a normal trading expense and is incurred not more than seven years before the trade starts, it may be treated as an expense of the first trading period.
  • Letting and/or management fees
  • Service charges
  • Ground rent if the property is in a block of flats
  • Cleaning costs
  • Accountancy charges
  • Mortgage interest 
  • Replacement allowance for tools. This includes items such as cutlery, crockery, cushions, bed linen and similar but not carpets, sofas, beds or free-standing “white goods” such as cookers and fridges that are not “built in”.
  • The flat rate, 10% of net rents deduction, for the wear and tear of all plant, machinery etc. used in the furnished let property.
  • No capital allowances are available for replacement (or new) plant etc. used in a dwelling house.
  • Up until 6 April 2015, landlords can claim a special deduction of up to £1,500 per property for insulation. This allowance known as the ‘Landlord Energy Saving Allowance’ is in respect of the costs of installing wall, floor, loft or hot water insulation to a let property. As long as the insulation is fitted to a finished property, not while it is under construction, you can claim this special allowance for the work completed before you let the property for the first time.
  • If the property has increased in value, you can take out additional loans on the increased value and claim interest, providing the amount is not greater than the purchase price.


Depending on the level of capital available for deposit, most landlords take out interest-only mortgages at a level where the repayments are roughly equal to the net income. Typically this is at a loan-to-value of 50-60 per cent. This means you will have eliminated your tax liability and you have made your equity work harder for you.  


 

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