Landlords' Accounting Services

Some landlords who do not use a landlords' accounting service believe that if the mortgage payments for the property exceed the rental income received, they will not be required to declare the income as they are not making a profit, but this is not true and the following are areas of concern:

1. Unless a self assessment tax return is submitted annually including the rental income and expenses, they could be losing out on losses arising from the rental property each year which they can then carry forward year on year to set against any future profit arising from rental business. These can mount up and reduce the need to pay tax in the period when a profit first arises.
   
   
2. If the mortgage is not an Interest only mortgage then part of the monthly repayments are related to reducing the balance outstanding on the mortgage and as such are capital repayments and not allowed as a deduction against the rental income. Only the actual interest charged can be deducted and as this may be less than the rents received creating a profit that needs to be declared and a charge to tax.
   
   
3. If the mortgage includes a re-mortgage amount for items other than related to the rental business e.g. to buy a car, then the amount of the interest related to this additional borrowing is not allowed as a deduction against the rental income.

Overlooked Deductible expenses

Many landlords use letting agencies to manage their properties and in such cases monthly statements are usually provided which makes it easier to see income and expenses at a glance.

However, these statements will not include all deductions that can be made and care needs to be taken to ensure all deductions due are claimed. Some important deductions that can easily be missed are: -

Insurance

If the property is let out unfurnished a claim can be made for any buildings insurance on the property. If the property is fully furnished then this can include a claim for contents insurance too.

Insurance may also be taken out to cover items such a central heating breakdown etc. or insurance against loss of rents and these are also claimable.

Advertising

If you incur costs on advertising the property for rent these are deductible.

Cleaning/Gardening

If you employ a cleaning/gardening company you can claim the costs involved. However, if you clean the property or tend to the garden yourself you can only claim for the cost of the any products used and cannot claim for your own time.

10% Wear & Tear Allowance

If a property is rented out fully furnished* a 10% deduction from the net rents can be deducted each year to cover the depreciation of furniture and white goods etc.

*The definition of a furnished property is one which is capable of normal occupation without the tenants having to provide their own beds, chairs, tables, sofa, cooker etc.

Travel

Any travel to the property for rent collection, property inspection etc. can be claimed at the set rate of £0.40 per mile. However, this is only allowable when there is no private element to the trip.

Council Tax & Utility bills

If you are required to pay council tax and/or utility bills on the property during periods of absence of a tenant, but whilst the property is still on the market for rent, you can claim these as allowable deductions.

Page content supplied by: TWDaccountants of www.twdaccountants.co.uk

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