Tax Forum :: Free Tax Advice

Hi,

I've recently bought a buy to let property (this month) and I'm currently renovating it with the hope for it to be rentable in April.

All of my initial expenses are going to be in this current financial year (in March), do I need to complete a self assessment now even though i don't have a tenant and haven't made any profit yet? Only loss from the spending on renovating so far.

I'm wondering how this is going to affect me with being able to offset my expenses so far against any tax i have to pay on profit in the future?

Many thanks
David

The cost of rennovating a property is likley to be a capital rather than a revenue expense. That means it will be deducted when calculating the gain when you sell it. It cannot be deducted from income,

Any other revenue expenses that you incur will be treated as incurred on the day your rental business begins: that is usually the day your first tenant is in situ.

If it is to be let in April, then the amount of structural work involved, that might be capital in nature, is quite likely limited.

Pre-letting expenditure is capital if it can be seen materially to improve the asset's value, rather than simply being part of an ongoing cycle of maintenance of a long-lived asset.

If you are adding rooms or facilities, then that is almost certainly capital.

If you are redecorating, re-furbishing and undertaking general reparations then this is likely all allowable "on revenue account", unless the property's value was significantly depressed because of dilapidations that you have remedied. Just because a property needs maintenance does not make such work capital on a change of ownership.

While the principle that pre-letting expenses are claimed on the first day of business is good, I should argue that, strictly, the business actually starts when you have a property ready to let and start actively to seek tenants. You might find a tenant in a couple of days so it may make no real difference.

If you are going to be spending a significant amount of money, then you should consult with a suitably qualified adviser, who will be able to advise you on the specifics.

Kind regards,

Lambs