The main benefit of being a landlord is of course rent collection but on top of that, you get the benefit of landlord tax reductions. While everyone pays a little tax to help with the upkeep of the infrastructure of the country and provide amenities such as good roads, hospitals and schools, many people wish they didn’t have too (though deep down we all know it’s a necessary evil). However for some, the tax burden is reduced to help promote that type of business and encourage people to enter into that profession.

While all rent income a landlord receives is taxable, the amount paid is reduced and lower than the national standard for the United Kingdom. When buying a property to rent out, most landlords use a mortgage known as a buy-to-let, which tends to have higher rates that need to be paid back each month. So as not to discourage people from becoming landlords, tax deductions are given in a bid to address this imbalance and attract people to enter the business of renting properties.

Application of Landlord Tax Deductions

This partial waiver of income tax that is given for money received from rent is applicable in several ways, but all these are waivers directly related to the rented property. The main waiver that is applied is the expense incurred in the maintenance of the house or flat. This means that a record of any expense incurred in the process of maintaining the property should be kept and later shown to the tax man as tax deductible. These include;

• Expenses on repainting
• Expenses incurred in replacing of damaged furniture
• Costs of replacing water pipes and disposal ducts

The other main area of landlord tax deduction is on the insurance that is paid for the property. Ideally, the rented property should be insured against any possible risks, especially theft, and water and fire damage. Unfortunately all too often landlords neglect to have this type of insurance on their rented properties despite the common sense factor of knowing any liable is covered and despite the fact that tax breaks are available.

Apart from the maintenance cost, there are other costs that come along with being a landlord that are tax deductible, these include;

• Expenses incurred in the accounting processes i.e. paying the fees of an accounting firm
• Costs incurred in advertising the property. Agency costs and/or costs of newspaper ads etc.
• Costs incurred in rent collection. This could be any money spent on petrol while collecting
• Cleaning and gardening costs. Any money spent on materials or hiring home and garden cleaners.
• Tax paid to the local council while the facility is unoccupied.
• Fees incurred for the hiring of professional services. This could be builders, painters or any type of maintenance work.
• Costs incurred in the provision of services to the rented property such as water and gas
• Depreciation in the form of wear and tear, this is normally 10% of the gross rent income.

The most important thing to remember for a landlord hoping for tax deductions is to keep a record of everything. All money that comes in and goes out should be accounted for, that way it can more accurately be worked out what is the correct amount of tax a landlord should be paying.