Landlords - tax return query

[Watto1]

In May 2015, I became a landlord for the first time. I'm renting out my late mother's house after it failed to sell, so I'm a bit of an accidental landlord really.

I'm currently trying to do my tax return. It all seems relatively straightforward but I have a query about allowances. I understand that maintenance is an allowance but improvements are not. I had to totally replace 3 ancient aluminium Windows with UPVC windows as they were leaking really badly and the wooden frames were rotten. Repair wasn't possible. My question is, does this count as maintenance or an improvement?

Many thanks

[whois]

www.property-tax-portal.co.uk/taxquestion151.shtml

That link has good guidance.

Basically I would try for it being maintnacne as you replaced with the nearest modern equivelent.

[Watto1]

Thank you whois, that's great!

[loveisagirlnameddaisy]

Another thing to educate yourself on Watto are the tax changes to mortgage interest relief. From next April, if you're a higher rate tax payer, you'll be liable for more tax on your rental income than you previously have been.

I think many landlords are still unaware of the changes and may come as a shock when your tax return is due.

[Watto1]

Thanks love is. Yes I did know about the tax changes but I'm not a higher rate taxpayer. There's so much you need to learn about when you become a landlord!

[SauvignonPlonker]

While we're on the subject, I'm also doing my tax return as a LL. I've always claimed the 10% wear & tear allowance, however last year I had a large capital spend (£1.5k for a boiler replacement).

Is it possible to claim that under maintenance? If not, could I change from wear & tear for just 1 year? (I know the wear & tear allowance stopped at the end of the last financial year, the one I'm doing self assessment for).

Hope that makes sense - I'm definitely not an accountant!

[whois]

Yes you can switch for just one year.

However not that for the 2016/2017 tax year ie the one we are now in, you can no longer claim wear and tear and claim for actual expenditure.

www.gov.uk/government/publications/reform-of-the-wear-and-tear-allowance/reform-of-the-wear-and-tear-allowance

[whois]

So happy I only have one final tax return to do for rental income!

[SauvignonPlonker]

Thank you! I might switch to capital expenditure for last financial year then.

Last year's return is quite hideous as I had lots of work done on the place & loads of expenses. Normally it's pretty straightforward.

I'd love to have an accountant but can't justify it with just one property and my overdraft

[Watto1]

I didn't know the wear and tear allowance was going too. What with that and the mortgage interest allowance going, my tax bill will be interesting next year to say the least!

[SauvignonPlonker]

Yes, I think it will become uneconomical for many LL once these allowances end, especially those with interest- only mortgages & who are high rate taxpayers.

I guess that's what George Osborne wanted though, to try & burst the BTL bubble.

[OurBlanche]

Other good sites are:

www.landlordtoday.co.uk/breaking-news/2016/6/fall-in-serious-rent-arrears

www.landlordzone.co.uk/

Join the Zone and ask questions, you will get speedy and detailed asnwers there too!

[Watto1]

I was leaning towards switching to an unfurnished let when my current tenant leaves anyway but this makes the decision easier.

[SauvignonPlonker]

Yes, that seems to be the case locally. I think it's also due to the complexities of the deposit schemes (if tenants dispute deductions) & level of detail/ time required for adequate inventories.

[OurBlanche]

May I ask a cheeky question?

Do you do your own inventories? If so, why? Why did you decide not to use an independent inventory clerk?

[Watto1]

I did it myself to save money. However, it was a huge faff and I will ask the agency to do it next time. I'm lucky in that I have a fabulous tenant and j would be incredibly surprised if there were any issues on check out. She has kept the house in an immaculate condition. I may not be so lucky next time.

[OurBlanche]

Thanks.

I am trying to work out if it is worth me spending any time/money trying to advertise to landlords. Obviously I am biased, I think I am worth it. But I have been told mainly by agents ) that a lot of LLs don't know they can ask tenants to share the expense of inventory, check in / out. Or that they don't know why it might be beneficial.

Then again, finding a landlord is not easy, no offices, might live miles away from the rental property...

Mmmm!

[SauvignonPlonker]

I use an agency to sort the inventory; I did it myself previously & had a bad experience with a previous tenant, which went to arbitration at the deposit scheme, so had my fingers burned.

I have a few friends who self-manage & they are generally clueless about how vulnerable they are without a watertight inventory.

[OurBlanche]

OK. So it might be worth putting a lot more effort in.

I am in with some agents and have a couple of LLs, but with 1 property each they aren't in position to know m/any others either

Social media. Local Ad Mags and newspapers... I'll spend tomorrow having a good snoop round

[whois]

Do you do your own inventories? If so, why? Why did you decide not to use an independent inventory clerk?

I used an independent inventory clerk via the agency. Not worth the risk doing it yourself I think.