The Fish Partnership’s tax team have a great deal of experience in helping owners of rental properties, and their advice and guidance can help you to minimise your income tax and capital gains tax liabilities.
Income tax will be charged on income received from rental properties, after allowable expenses are deducted.
Rent is taxed each year, based on the income that is due to you during a tax year, rather than on the rent that you actually receive during the year.
However, you are eligible for tax relief on the following:
- The interest on the mortgage taken out to buy the property
- Letting agency fees
- Advertising the property for let
- Repairs to the property and general maintenance costs
- Insuring the building and contents
- 10% of the rental income each year to cover depreciation in the value of furnishings, including sofas and carpets (this does not include fittings such as kitchen units and bathroom suites)
There will be various expenses that you will incur on your property that you cannot offset against your rental income, such as:
- Renovation work and improvements made to the property
- Capital repaid on any loan taken out to buy the property
- Costs incurred while the property is not available for letting
- Costs of purchasing and selling the property
These lists are not exhaustive and we would recommend that you seek our advice regarding any expenditure incurred to ensure that you obtain any tax relief available. There are additional rules regarding furnished lettings, including furnished holiday lettings. These rules may result in you being able to claim additional expenses against your income.
When you come to sell the property, capital gains tax will be chargeable on any gains made, less the price that you paid for the property and various other costs including those of purchasing and selling the property, such as legal expenses, estate agents fees and stamp duty.
The amount of tax that you will eventually pay will depend upon the length of time that you have owned the property, and whether you have lived in the property at any time during your ownership.