The new tax year is fast approaching along with new measures curbing mortgage interest relief that could see HMRC bills soar for some landlords, so now is a good time to look at property expenses that they can claim but probably overlook.
The reason for claiming property business expenses is simple – every pound offset in the accounts cuts rental profits and decreases the tax a landlord must pay.
- Home as office costs – These can vary depending on the size of a landlord’s property business. Every landlord can claim either a flat rate or calculate an amount based on time and space used for business at home. Either claim a flat rate of £18 a month or claim up to £26 a month based on simplified accounting rules or more by collecting bills and working through the claim
- Paying a spouse or partner – If you are part of a group of friends or family owning letting property, you cannot claim compensation for spending your own time on business tasks but you can pay a non-owner for doing the work for you. The proviso is the amount paid reflects the work they carry out. The payment then goes into the accounts as a business expense to reduce taxable profits. This tax strategy is also a good way of transferring the burden of pocket money for teenagers to your property business. Keep the amount below the national insurance threshold and it’s a win/win for the business and the worker
- Have a treat on the tax man – Business owners can claim up to £150 each every tax year on an annual dinner, including hotel costs and travel.
Don’t forget you can make retrospective claims for property business expenses by talking to a tax inspector.
As single claims, the savings may look small, but together they can add up to hundreds of pounds of expenses a year that can significantly impact tax paid.