Income tax expense or CGT?

[Kellis]

I am about to try to do my first property tax return and have a few questions please.

1. Do bonds paid by tenants count as income?
2. I understand that legal fees incurred for the original purchase of the property cannot be claimed against income tax but can be put against CGT - does that mean just the solicitor's fees or does it include disbursements eg search fees? What about valuation fees charged by the lender?
3. We have remortgaged our own property to provide deposits for buy to let properties - can the interest on these loans be claimed against income tax?
4. Improvements eg a new bathroom - does both materials and labour for installation go against cgt or is any an allowable expense against income?
5. What constitutes "furnished" when considering wear and tear and capital allowances? One of our properties has a freestanding cooker and fridge and the others have a built in cooker and all have carpets - can we claim any wear and tear?

Many thanks.

Kerry

[Tax Accountant]

I am about to try to do my first property tax return and have a few questions please.

1. Do bonds paid by tenants count as income?

Answer: No.

2. I understand that legal fees incurred for the original purchase of the property cannot be claimed against income tax but can be put against CGT - does that mean just the solicitor's fees or does it include disbursements eg search fees? What about valuation fees charged by the lender?

Answer: All these are additional costs of acquiring the property and not deductible in your lettings account.

3. We have remortgaged our own property to provide deposits for buy to let properties - can the interest on these loans be claimed against income tax?

Answer: Yes

4. Improvements eg a new bathroom - does both materials and labour for installation go against cgt or is any an allowable expense against income?

Answer: All improvements are generally CGT. However, if the bath is renewed again at a later date, this will be deductible from rents as Repairs & Renewals.

5. What constitutes "furnished" when considering wear and tear and capital allowances? One of our properties has a freestanding cooker and fridge and the others have a built in cooker and all have carpets - can we claim any wear and tear?

Answer: I have not checked this properly but would say that you need to supply white goods, bedroom furniture, lounge furniture, dining table & chairs, carpets, curtains etc before the house could be classed as furnished lettings. You will normally not be able to claim any deductions for the cost of these expenses if you claim the wear and tear allowance.

Alternatively you could claim the expenses on a Renewals basis.

Many thanks.

Kerry


See answers above after each question.

Ramnik