[Avatar]
  • HMRC Admin 50
  • Joined: 21/06/2017 15:34:03
  • Messages: 1615
  • Offline
  • View profile
  • Send message

Tax relief for residential landlords

28/09/2018 13:32:44
The amount of income tax relief some landlords get on residential property finance costs has been restricted to the basic rate (20%) from 6 April 2017.

If you are a basic rate tax payer, you won’t notice any difference in the amount of tax relief you receive, but there is a different way of claiming it.

HMRC are phasing the restriction in gradually from 6 April 2017 and it will be in place fully from 6 April 2020.

The phasing in will be as follows:


2017-18 - Claim 75% as normal, claim 25% as a tax adjustment at basic rate.

2018-19 - Claim 50% as normal, claim 50% as a tax adjustment at basic rate.

2019-20 - Claim 25% as normal, claim 75% as a tax adjustment at basic rate.

2020-21 - No claim as normal, claim 100% as a tax adjustment at basic rate.

So, for 2017-18, you will claim 75% of your loan interest as an allowable expense in the section for Property expenses - Loan interest and other financial costs (box 26 on the paper tax return). Then under the section Calculating your taxable profit or loss – Residential finance costs not included in box 26, you will show the other 25% of your loan interest (box 44 on the paper return). We will then automatically allow you 20% basic rate tax relief on that 25% figure.

If you are a higher rate tax payer, you will notice the difference. For 2017-18, you will still get higher rate tax relief on 75% of your finance costs, but you will only get basic rate tax relief on the remaining 25%.

Please see the links below for more guidance on this on GOV.UK.

Tax relief for residential landlords: how it's worked out

Income tax when you rent out a property: work out your rental income

This message was edited 1 time. Last update was at 22/11/2018 10:04:23

[Avatar]

Tax relief for residential landlords

08/10/2018 10:49:07
can I claim relief on legal costs in defence of eviction of bad tenant?
[Avatar]
  • HMRC Admin 50
  • Joined: 21/06/2017 15:34:03
  • Messages: 1615
  • Offline
  • View profile
  • Send message

Re:Tax relief for residential landlords

08/10/2018 11:50:16
Hi,

Thanks for your question.

You can claim these legal costs as an allowable expense. Please see the link below to our Property Income Manual.

Property Income Manual 2120

I hope this helps.
[Avatar]

Tax relief for residential landlords

09/10/2018 11:13:02
Can you claim cost of utilities on an empty property between tenants?
[Avatar]

Re:Tax relief for residential landlords

09/10/2018 17:32:46
Thanks for your question.

Provided the property was available for let, i.e. it was actively being advertised; council tax and other costs such as utilities will be allowable to the extent that they are solely for the purpose of the rental business.

You can find further guidance in our Property Income Manual here:

PIM2120
PIM2140
PIM2505

I hope this helps.
[Avatar]

Tax relief for residential landlords

10/10/2018 06:57:22
If a tenant has moved into a rental property and they complain that some work needs to be done (ie in my client's case £2800 worth of plastering), can this be claimed as an expense?
[Avatar]

Re:Tax relief for residential landlords

12/10/2018 10:24:25
Hi,

Thanks for your question.

Expenditure on rental property, including plastering is allowable as an expense. You can find further general guidance at:

PIM2120
PIM2140
PIM2505

We also have specific guidance on deductions and repairs here:

PIM1900
PIM2025

I hope this helps.

Thanks for using HMRC Online Customer Forum.
[Avatar]

Re:Tax relief for residential landlords

06/11/2018 10:33:11
Hi - I am in the process of completing my return and I notice there is a box to claim £1000 tax relief. The way I have read the various bits of advice on this is that it is a flat rate relief against allowable expenses which you can claim instead of itemising all expenses. My expenses fall short of £1000 - can I still claim the full £1000?
[Avatar]

Re:Tax relief for residential landlords

06/11/2018 11:16:31
Hi,

You can claim the full £1000 property income allowance instead of expenses if this is more beneficial to you.

However, you cannot claim the full £1000 to put yourself in a loss position.

For example, if your property income was £600 and your expenses were £700, you could not claim the £1000 property income allowance to create a loss of £400. You would have to claim the expenses to create the allowable loss of £100 which would be available to carry forward to set against future year’s profits.

Please see the following for further information:

Tax-free allowances on property and trading income
[Avatar]
  • Steve Hutchinson
  • Joined: 06/11/2018 10:34:35
  • Messages: 1
  • Offline
  • View profile
  • Send message

Tax relief for residential landlords

06/11/2018 11:34:24
Thank you! So to be clear (sorry) even though my allowable expenses are less than the £1000, I claim that instead of listing the actual expenses as long as it doesn't put me into a loss? Are my financial costs included in this £1000-I am a basic rate taxpayer?
[Avatar]

Re:Tax relief for residential landlords

06/11/2018 12:18:34
Hi Steve,

Yes, you can claim the £1000 even though your expenses are less than that. Any financial costs are included in the £1000. You basically claim the £1000 or expenses. You cannot claim both.
[Avatar]

Tax relief for residential landlords

07/11/2018 08:13:49
I think I understand the above but what is the definition of allowable expenses....is that mileage and such as I would imagine that things such as property insurances, repairs are covered elsewhere on the self assessment? Thanks in advance for the guidance.
[Avatar]

Re:Tax relief for residential landlords

07/11/2018 08:40:21
Hi,

Thanks for your question.

Please see the following for details of allowable expenses:

Income Tax when you let property

Any expenses related to the renting out of a property should be shown on the Land and Property supplementary page. To be clear though, if you are claiming the £1000 property allowance, you cannot claim any expenses that relate to renting out of the property. This includes mileage, repairs and insurance.
[Avatar]

Tax relief for residential landlords

19/11/2018 08:18:19
Thanks for the response. Ok hi have not selected this limit as the cost of insurance, repairs and mileage comes to more than £1000 - I have itemized these in all the relevant sections of the return. I generally visit the property once every month so I assume this is an allowable mileage expense?

Appreciate the help as want to get this right.
[Avatar]
  • HMRC Admin 50
  • Joined: 21/06/2017 15:34:03
  • Messages: 1615
  • Offline
  • View profile
  • Send message

Re:Tax relief for residential landlords

19/11/2018 12:06:11
Thank you for your question.

To clarify, if you did not claim the £1000 Property Allowance you can claim for the mileage expenses incurred in visiting your properties. Part business and part private - Where the business element and private element can be separately identified, the business element is an allowable deduction.

You must keep clear and complete records in support of any claim you make. Where there is no way to separate the business and private elements, no deduction is allowed. For example, a journey might be for a combined personal and business purposes.

I hope this helps.

Reply