Landlords’ Allowable Expenses – Do You Know What You Can Claim?

All Edinburgh landlords must submit tax returns for the income earned on their buy-to-let properties. Still, many fail to take full advantage of the allowable expenses that can be deducted from the income, potentially losing hundreds of pounds.

What’s an allowable landlord expense?

Allowable expenses are wholly and exclusively for the rental property, such as Clan Gordon’s letting agent fees and landlords’ insurance. They cannot include items used only in part for the property, such as garden tools or a vacuum cleaner that the landlord also uses for their own home.

However, if a mobile phone is used partly for property rental purposes, you can claim a proportion of the bill. You can claim expenses such as council tax and utility bills if tenants do not pay these.

Any charges paid for the process of letting the property, including advertisement costs, can be claimed, and policies such as buildings and public liability insurance are also acceptable expenses.

Careful management of letting expenses required

To make the most of allowable expenses, it’s crucial to carefully manage any expenditure, keeping accurate records and ensuring receipts are retained. Many landlords fail to record smaller purchases throughout the year because they think they are insignificant, but they can add up to a considerable amount over time.

Know what expenses you can claim as a landlord

Not knowing what’s allowed is the main reason most landlords fail to take full advantage of allowable expenses, so it’s worth spending time researching everything that is permitted or using a tax expert to help submit a return. The fees charged by the expert are also allowable expenses!

Some lesser-known expenses that can be legitimately claimed are end-of-tenancy cleaning, gardening, and general DIY. Landlords often do these jobs themselves to save money when they could add them to their allowable expenses.

Other allowable expenses include:

• Legal fees for pursuing unpaid rent
• Bookkeeping
• Travel costs to and from the property
• Stationery
• Bulky refuse collection

Repairs and maintenance to your rental property

The cost of maintaining a rental property to the required standard is an allowable expense, such as redecorating, repairing a roof, or fitting a new front door. Fixtures and fittings - new furniture or white goods - are not included, but landlords can claim for them as Replacement Domestic Items Relief if the property is fully or part-furnished. Replacing items such as sinks and baths are allowed as they count as repairs.

However, replacing anything should be ‘like for like’ and not superior quality. Upgrading the property, such as an extension or loft conversion, is not an allowable expense.

Given the complex nature of allowable expenses for tax returns and the fact that consulting a professional is tax-deductible, it’s worth considering taking advice.

Clan Gordon is an award-winning letting agent with 15 years of experience in the Edinburgh property rental market. Our team of professional property managers can offer impartial guidance on all matters relating to your letting – click here to schedule a call with one of our expert advisors.