As a landlord, it’s important to stay updated on shifting tax regulations so you can ensure you’re making accurate claims and deductions.
HMRC’s recent “One to Many” letters have caught the attention of landlords with property income, in relation to repairs expenditure.
The letters state that HMRC will be reviewing the tax returns of landlords who have claimed for repairs on their properties, and if they find any discrepancies between what was claimed and what was actually spent, they may issue penalties.
In this article we’ll look at what you need to know about deductible repairs vs capital improvements, so you can avoid any issues with HMRC.
What are deductible repairs?
Deductible repairs are those that are necessary to keep your property in a good state of repair and are not capital improvements – and can therefore be deductible as a business expenditure.
Examples of deductible repairs include:
Exterior and Interior Painting and Decorating
Freshening up the paintwork and enhancing the overall appearance of your property can be claimed as a deductible expense. This includes both exterior and interior painting and decorating.
Stone Cleaning
If you invest in professional stone cleaning services to maintain the aesthetics of your property, these expenses can also be deducted against your rental income.
Damp and Rot Treatment
Necessary repairs to address dampness, moisture, and rot issues in your property can be claimed as deductible expenses.
Mending Broken Items
Repairs such as fixing broken windows, doors, furniture, or malfunctioning appliances like cookers or lifts can be claimed as expenses.
What classifies as a non-deductible expense?
Non-deductible expenses are improvements which are considered to be a permanent addition to your property and increase its value over time – and therefore cannot be claimed as a deduction against your rental income.
Examples of non-deductible expenses include:
Adding Insulation
If you add insulation where there was no previous insulation, it is considered a capital improvement and cannot be claimed as a deduction.
Central Heating Boiler Upgrades
Upgrading your central heating boiler to a more energy-efficient model, although beneficial, is categorised as a capital improvement and not deductible as a repair expense.
Property Additions
Investments in extensions, loft conversions, or conservatories are considered capital improvements and cannot be deducted against rental income.
Staying up to date with the complexities of deductible repairs and non-deductible capital improvements can be challenging, but it’s important to understand the difference between the two.
If you’re not sure whether a repair is deductible or not, we recommend getting advice from a tax advisor before making any decisions.
Our team of knowledgeable tax planning experts will assist you in reviewing your tax returns, helping you identify opportunities and make any necessary amendments.
We are ready to support you in all your financial needs. Contact us today to benefit from our expertise and enjoy long-lasting business growth.