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As a property investor, you have a golden opportunity to maximise the tax savings on your investment properties by claiming allowable expenses against your tax return. The allowable expenses for landlords vary depending on the type of property investment, but working with Property Accountants, experienced tax accountant can substantially reduce the level of your tax liability and help increase your profitability of rental income. What are the tax deductions for my investment property? You may claim a few deductions on your property investments, including: Property repairs and maintenance Council tax and utilities Mortgage interest Legal fees Advertising and marketing costs Business travel expenses This blog is created with a lot of experience and enthusiasm to equip you with the necessary knowledge to minimize your tax burden and maximize your profits. What are allowable expenses? An allowable expense is any cost you have to incur in connection with your investment property, which you can deduct from your rental income when you come to fill out your Self Assessment tax return. Running a property letting business incurs many expenses, but claiming allowable expenses is one of the most valuable means of gaining tax relief on some of these inevitable expenses. How do you claim allowable expenses for investment properties? Claiming allowable expenses for your investment property requires careful management and accurate record-keeping. Maintaining clear and detailed records of your expenditure ensures that you work efficiently and take full tax-saving opportunities. The process involves: Adding all your property expenses: repairs, utility bills, plus all your other business expenses. Subtracting these expenses from the rental income. Reporting this to HMRC via your tax return, if self-employed, or through accounts and company tax returns if operating as a limited company. What do allowable expenses allow an investor to claim in an investment property? Probably one will be allowed to claim on everything that does exist: Materials Use of your home for business purposes Business equipment Subcontractor costs Payroll for staff Business travel expenses Some expenses, such as using your personal vehicle for business purposes, can be more complicated to work out. At Account Ease, we advise keeping thorough records of your expenditure to make the preparation of your income tax. Or corporation tax return as straightforward as possible. Our team will support you through every step to make sure you maximize your tax relief and plan effectively to realize the most tax-efficient savings on your property business. How to keep a record of your expenses The size of your property business defines very often the type of accounting and bookkeeping tool you need. We would encourage you to conduct some robust software in tracking expenses, preferably some property-specific software or even professional platforms like Xero. Of course, the smallest property businesses might start out with Excel for simplicity. The best way of managing your expenditure is to write down every transaction. Classify it according to its type, whether it be marketing or office supplies. This gives your accountant a complete report from which they can work out a very good tax strategy and include it in your tax return at the end of the financial year. For limited companies, this becomes a lot more complex: you will have to reconcile bank accounts and prepare a balance sheet in accordance with accounting standards. In such cases, professional software like Xero is highly recommended. What isn’t considered an allowable expense for an investment property? We have talked about allowable expenses, so let’s discuss some expenses that generally cannot be claimed as allowable against your investment property. Non-Deductible Expenses for Investment Properties Generally, the expenses that are not allowable would be those unrelated to maintaining the property or running your investment business. These may include: Property Improvements: If you are making a major improvement or renovation in your rental property to enhance its value. Then that cost is ‘capital expenditure.’ In other words, this can’t be considered against the income tax deductions. Personal Expenses: Expenses that do not have a direct relation to your income gain, like a personal telephone bill or utility bill and non-business related travel, are not deductible from tax. Property Restoration: If your rental property is not lettable, the necessary expenditures on making it a rentable unit cannot be regarded as allowable expenses regarding your annual income. Overview Treating your property investment like a business is a vital aspect of increasing your yearly taxable income. As a landlord, you can substantially reduce your end-of-year tax burden by identifying and claiming the most tax-efficient allowable expenses. Most of the expenses you incur in maintaining your rental properties. Such as council tax, utility bills, and other business-related expenses, can normally be claimed under your tax return. Contact Our Specialist Property Accountants At Account Ease, we combine entrepreneurship with accounting expertise to meet your unique property investment needs. We pride ourselves on being innovative, taking a personal approach to make sure each client has tailored advice for their path to financial success. With Account Ease, you’ll get a warm welcome and a dedicated service that’s fully focused on growing your personal wealth and helping you reach your goals in life. Get in touch with our expert property accountants today and let us get you started!