In a nutshell, any expenses that are wholly and exclusively incurred for running your property business, as it were, are deductible against your rental income.
The obvious ones you are probably claiming already - such as mortgage interest, maintenance / repair bills and agency management fees.
The type of expenses that are often under-claimed or are not claimed at all are:
- Travel expenses
- Computer equipment and office expenses
- Use of home as office
- Other professional fees
Let's look at each of the above in turn.
Travel expenses are often under claimed. Inevitably you will be required to travel from property to property at various points during the year in order to perhaps to check on tenants or even to check on repairs, general condition of the property etc.
You will also be making trips to see your bank manager (in connection with financing), solicitor (for sales and acquisitions) and accountant (tax return and advisory chats) throughout the course of year. You may also attend some conferences, courses and even visit DIY centres etc all for the purpose of maintaining and improving your property business.
You can claim your travel expenses of attending to all of the above where the reason for incurring the travel is directly related to management of your property business.
If using public transport e.g train, planes then those expenses are easy to log and claim. If using your car however, you can use the HMRC approved rates for mileage which allow you to claim 45p per mile up to 10,000 miles and 25p thereafter.
So long as you keep a mileage log (which is very easy these days through some smart apps that have been developed such as MileiQ – www.mileiq.com or Tripcatcher - www.tripcatcherapp.com), you can put a claim in for each mile at 45p against your rental profits.
As an example, if you did on average around 5,000 miles per year attending to matters of your property business, that would result in a claim of £2,250 against your rental income - which in cash terms would be worth a saving of £900 if you were a higher rate tax payer.
Computer equipment and office expenses
No doubt you use a computer / mobile phone to undertake some or all of your property investment activities. As such, you should be claiming for a proportion of the capital and ongoing costs of such equipment and services.
If you use your devices mainly to run your property business, then you can potentially claim for the whole cost of buying and any associated ongoing monthly costs - as incidental private use is acceptable.
Use of home as office
No doubt with the way of the world these days, some element of managing your properties is undertaken from your own home - be it using a room in your home as an office for some of the time or storage of any documents etc, or even holding any meetings with the joint holder of your property across the kitchen table! ;-)
It is possible therefore to apportion some of the running costs of your home (that you have already personally paid for) and offset this against your rental profits. This can be done by adding up all your home bills, mortgage interest, council tax etc and then dividing by the time and space that you use for business purposes.
Other Professional costs
Don't forget to include the costs of any professionals used in the management of your property interests e.g solicitors, accountants, property consultants, property courses etc.
Bottom line, ask yourself whether the expenditure you incur is directly related to your property activity and if the answer is yes then you can most likely claim it.
Hope that helps - happy tax saving!