This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Should I claim property allowance or allowable expenses for this year?

jtufty
Posts:34
Joined:Sun Jan 13, 2013 12:51 pm
Should I claim property allowance or allowable expenses for this year?

Postby jtufty » Sun Feb 02, 2020 9:27 am

Hi,

Im a higher rate tax payer. For the past 2 years I have had a second home which I rent out. Income is £8.4k pa.

As I understand it, I can either claim £1k property allowance OR allowable expenses.

Last year my allowable expenses were only a few hundred so it made sense to claim the £1k property allowance. But this year Ive had to pay out a lot in maintenance (so far about £3k). Theres a few things Id like/need to get done on the property such as fixing the leak in the chimney and installing double glazed windows. If I got these bits done then my overall expenses this year will be about £7.5k.

Am I right in thinking Im better off paying all this out in one tax year? (Because I can claim either £1k property allowance OR expenses). So this year Ill claim expenses and then next year I go back to claiming the £1k allowance.

Because of the recent tax changes for landlords, I can only claim 20% of these expenses? So Id be saving £1.5k (20% of £7.5k)

Just looking for a bit of clarification.

Many thanks

jerome.lane
Posts:237
Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire
Contact:

Re: Should I claim property allowance or allowable expenses for this year?

Postby jerome.lane » Mon Feb 03, 2020 11:23 am

You can claim all the expenses - its only finance costs that are restricted to a maximum 20% of actual cost as an income tax deduction from 6 April 2020.
You are correct in your analysis of opting in and out of the £1,000 property allowance.
Jerome Lane
Tax Adviser
Telephone: 07943 005902

jtufty
Posts:34
Joined:Sun Jan 13, 2013 12:51 pm

Re: Should I claim property allowance or allowable expenses for this year?

Postby jtufty » Mon Feb 03, 2020 1:02 pm

Are 'finance costs' mortgage repayments? (I own the property outright).

So for all expenses I can claim 40%?

Jerome_Lane
Posts:25
Joined:Mon Jul 22, 2019 10:13 am
Location:Camberley, Surrey
Contact:

Re: Should I claim property allowance or allowable expenses for this year?

Postby Jerome_Lane » Mon Feb 03, 2020 1:37 pm

Kind of - if you are a HR tax payer, any profit is taxed at 40%.
Jerome Lane
Tax Advisor
jerome.lane@stewartco.co.uk
Stewart&Co.
Chartered Accountants
Telephone: 01276 61203

Jerome_Lane
Posts:25
Joined:Mon Jul 22, 2019 10:13 am
Location:Camberley, Surrey
Contact:

Re: Should I claim property allowance or allowable expenses for this year?

Postby Jerome_Lane » Mon Feb 03, 2020 1:45 pm

Are 'finance costs' mortgage repayments? (I own the property outright).

So for all expenses I can claim 40%?
Finance costs are the interest elements of mortgage payments and any associated costs of securing finance.
Jerome Lane
Tax Advisor
jerome.lane@stewartco.co.uk
Stewart&Co.
Chartered Accountants
Telephone: 01276 61203

jtufty
Posts:34
Joined:Sun Jan 13, 2013 12:51 pm

Re: Should I claim property allowance or allowable expenses for this year?

Postby jtufty » Mon Feb 03, 2020 3:38 pm

Great - thanks guys!

I dont know why, but I got it in my head that ALL expenses had the 20% relief on. (Im HRTP, so I can get 40%! This is good news. :) )

jtufty
Posts:34
Joined:Sun Jan 13, 2013 12:51 pm

Re: Should I claim property allowance or allowable expenses for this year?

Postby jtufty » Wed Feb 19, 2020 8:39 am

Hi guys,

As a corollary question: If my allowable expenses exceeds income for this tax year (which is looking likely), can I carry this extra loss to next year and claim that aswell as the property allowance next year? If not, can I offset these losses against other non-rental income I have from this tax year? (ie from my self employed business)

Thanks

jerome.lane
Posts:237
Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire
Contact:

Re: Should I claim property allowance or allowable expenses for this year?

Postby jerome.lane » Wed Feb 19, 2020 8:59 am

You can only use the property allowance against rental income of the current year if you claim no other expenses - you cannot add the allowance to bought forward losses but a current year claim doesn’t wipe out those bought forward losses. You can only carry forward property losses to use against income of the same activity.
Jerome Lane
Tax Adviser
Telephone: 07943 005902

jtufty
Posts:34
Joined:Sun Jan 13, 2013 12:51 pm

Re: Should I claim property allowance or allowable expenses for this year?

Postby jtufty » Wed Feb 19, 2020 9:09 am

Thanks. Thats as I feared. Its looking likely that Ill be carrying over ~£1k loss into next tax year. If Im understanding you correctly then Im better off claiming the £1k property allowance next year. (Unless I incur further expenses next year).

Sashxxx
Posts:15
Joined:Thu Mar 12, 2020 4:58 pm

Re: Should I claim property allowance or allowable expenses for this year?

Postby Sashxxx » Sat Mar 14, 2020 3:07 pm

Hi,

I'm in a similar situation. Please could you let me know where on the HMRC website does it state that you can only claim the £1000 Property Allowance OR Tax Allowable expenditure? I can't find that rule anywhere and intended on deducting both, along with my 20% allowance on Mortgage Interest and for running a home office (allowable even for one property at £4 a week) plus 45p per mile for travelling to the property. Basically as much as I possibly can as I am also a HR tax payer :)

I'm just going to look into carried forward losses, too, as I will make a loss due to high repair costs at the property for the last tax year.


Return to “Property Taxation”