What can I claim against rental income

[josswallace]

I am in the process of renovating a large flat which I have just bought.

1. I have a private mortgage until the renovations are complete when I will get a buy to let mortgage. I am assuming I can claim the interest payments on both these mortgages against future rental income - is this correct.

2. Although the carpets were good quality they were very old and worn and I have replaced them all. Can I claim all this on my first tax return that includes the property.

3. The hot water in the flat was provided by two ascots serving the kitchen and bathroom and the heating was gas or electric fires. I have replaced all this with a central heating system for hot water and heating. What % of the central heating installation could I get away with claiming against future rental income.

I was planning to claim these amounts on my first tax return then go to the 10% of rental income on subsequent returns - is this the best approach.

Any help would be appreciated.

[Tax Accountant]

You can claim interest on the private mortgage as well as the replacement mprtgage. You maty need to deduct tax at 20% from the private interest and pay over only the net interest.

Carpets is furnishings and could be claimed as 10% wear & tear or renewals basis on a subsequent change but not both.

Central heating installation is always improvement and claimed when calculating capital gains tax on a disposal.

Generally, all expenses before commencement of lettings are additional costs of buying the property and putting it in a fit state to let before letting, and therefore not allowable against rental income. It is only the ongoing expenses incurred as a result of letting which are allowed as expenses against rental income. Improvements are always disallowed. Sometimes there is a fine dividing line between expenses and improvements.

Trust this helps.

[josswallace]

Many thanks for your reply.

As I expect to move into the property at some time in the future and live in it as my sole residence I don't expect to pay CGT.

If say the repalcement costs of the old ascots and electric fires was estimated at say £1000 could I claim this £1000 of part of the central heating bill.

[Tax Accountant]

Even if you move into the property in the future, you may still be liable to CGT based on the period whilst the property was not your only or main residence.

I don't understand your last paragraph. Basically, if the expenditure is an improvement, you cannot claim any part of it against your rental income.