Reduce your taxable income by maximising expenses.
At a time when the Inland Revenue is trying to maximize their tax revenue (when weren’t they?) we offer below a few pointers on expenditure you may not have considered.
Mortgage Interest
They key factor here is the purpose of the loan, not what the money is used for. So whilst you will probably be aware that the interest on the loan to buy the property you now rent out is deductible, did you know that if you re-mortgage and the total loan does not exceed the value of the property when it was first let the additional funds can be used for anything.
If the loan does exceed the original value you can still claim the interest as long as it is used on the property or to purchase another rental property.
The other key factor here is that you can only claim the loan interest, and not the capital repayment element of the mortgage payment.
Motor Expenses
The cost of running one or more cars used in your property business can be claimed as a business expense. Generally, the vehicle will have some private non-business use, so an appropriate proportion should be claimed.
The appropriate proportion will vary from investor to investor but could be in the range 25% to 50%.
However you could also claim mileage instead, as long as you keep proper records. Inland Revenue rates are 40p per mile for the first 10000 and 25p per mile thereafter- tax free!
Furnished Lettings Deduction
Most landlords rent out their properties fully furnished. You can claim either the 'wear and tear allowance' or 'renewal and replacement expenditure'. Most people are better off with the wear and tear allowance.
So given that the cost of second hand furniture is low you can furnish the property with just enough to qualify and then claim a valuable 10% deduction.
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