5 Tax Deductions Every Property Owner Should Know About

Pluxa Partners

May 17, 2024

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Key takeaways:

  • Use the top 5 tax deductions for property investors to reclaim your expenses.
  • Associate with professionals who can help you handle your properties and ensure you achieve the desired ROI with finesse.

Do you want to know all the important landlord tax deductions in the UK?

Do you want to improve your tax strategy and save money on rental property expenses?

Whether entering the rental property market or managing a large portfolio of properties, you must know how to leverage tax dedications.

You can reclaim multiple expenses to lower your tax burden and achieve your desired profits

So, let’s understand five tax deductions for property investors that can help you in the long run.

5 Ways How Property Investors Can Save on Tax

There are many ways to save on taxes, but we have filtered the top five ways that you must know for better future management. 

Tax related to mortgage interest

The government has phased out mortgage interest tax relief, which is highly significant for buy-to-let landlords. Before 2017, mortgage interest payments were deductible against taxes, but from April 2020, the benefit is no longer valid. 

So, is there any alternative now?

Yes. You now receive a tax credit of 20% of your annual mortgage interest payments.

Here’s a breakdown of how it works:

First, you must calculate your rental income, including all allowable expenses except mortgage interest payments.

Then, check the tax slab and calculate the income tax. A tax credit equal to 20% of the mortgage interest payments is applied, reducing the total tax liability.

For example, paying £10,000 in mortgage interest annually would receive a tax credit of £2,000 (20% of £10,000). The credit is deducted from your overall tax bill.

Reclaim repair and maintenance costs.

Repair and maintenance expenses are included in the allowable expenses of being a landlord in the UK. But what’s included in the cost?

You can include:

  • Fixing water leaks
  • Addressing heating issues 
  • Repairing broken windows

Apart from these, you can also consider gas and electrical tax expenses. You can also add regular maintenance tasks such as painting, decorating, and gardening. 

It’s important to differentiate between revenue expenses and capital expenditures.

Why?

Because one is deductible and the latter is not.

Proper documentation and consultation with a tax advisor can help you maximise these deductions and lower your tax burden.

Council tax

When filing the taxable rental income, you can also claim water rates and council tax as allowable expenses. 

These costs are considered with running and maintaining the property. But it’s important to ensure that these costs are directly related to the property you rented out to the tenants.

That’s not it.

These costs should be incurred exclusively to rent out the property. If not, you might get into trouble with the concerned authorities. 

Consulting with a tax advisor or accountant can help you navigate the complexities of tax regulations. They can ensure you correctly claim these expenses and help you optimize your tax strategy. Professional guidance is valuable to avoid errors and potential penalties.

Insurance

Have you insured your rental property?

If yes, then you can claim various types of insurance relevant to your property. 

What are the types?

Landlord and contents insurance.

The insurance covers risks such as damage to the building, loss of rental income, and liability.

You should maintain accurate records of all insurance policies and the premiums you pay. These documents are important for you to process the deduction. 

Also, regularly review your insurance policies to ensure they provide adequate coverage and represent good value.

Furniture and white goods

With new laws, the government now permits tax relief on costs for replacing items that are under ‘domestic’ classification. It includes: 

  • Beds
  • Carpets
  • Sofas 
  • Fridges

The wear-and-tear tax relief policy applies when an item is genuinely replaced and you don’t have any use of the product within your property. 

You can also claim for a like-for-like replacement. 

What’s that?

Your purchased item must be similar or identical in terms of type, function, quality, and price. 

Now that you know the top five tax deductions, we’ll help you go through one additional way of reducing your tax burden.

Additional tax reduction way: You can claim travel costs for visiting existing properties or scouting new ones. If your trip requires an overnight stay, you can add on your hotel costs and meals in restaurants. However, these expenses must be for business purposes. 

For example, if you travel to Brighton to view properties and spend an hour sunbathing, the trip is still considered business-related. But if you take your family to Brighton for a week and only spend one-afternoon viewing properties, the trip is private and not claimable for tax purposes.

These tax reliefs can help you reclaim your expenses and manage your rental properties with finesse. 

But if you need professional assistance with your rental properties, you can choose Pluxa Partners.

Pluxa Partners Can Assist You 

Being one of the leading property management service providers in the UK, we at Pluxa Partners understand how to handle your taxes as a property investor.

Our team can help you reclaim your expenses and minimise the hassles of filing your taxes. 

We have a solid strategy for different investors to ensure you don’t shrink on profits because of the high tax rates. 

So, what’s making you wait?

Contact our professional who can assist you with tax dedication.

FAQs

How do property investors avoid taxes?

Property investors can reduce taxes by claiming allowable expenses such as:

  • Mortgage interest 
  • Repair costs 
  • Council tax 
  • Insurance
  • Replacements for furniture and white goods 

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