First letting - legal costs

The accepted view is that legal costs for drawing up a lease and other expenses, e.g. surveyor fees, associated with the first time you let a property count as capital expenditure and so are not tax deductible. This is because the lease only puts you in a position to start your rental business rather than run it. However, HMRC's view is that where the first let is for a period of no more than one year, the legal etc. expenses can be deducted for tax purposes from rental income. Even where the expenses aren't deductible for a first let because it's for longer than a year, they will be for the lease renewal if that's for less than 50 years and doesn't include a lump sum payment (usually referred to as a premium).

Deductible travel

If you make a journey that is wholly and exclusively for the purpose of the rental business, for example, to make a repair to a property or to check its condition, you can claim the cost of travel from the place you manage the letting (often that will be your home) to the rental property and back.

If you use your car you can claim either a proportion of your motor expenses or HMRCs' mileage allowance (the latter is simpler to work out and often more generous).

Capital allowances

Whilst you can't claim Capital Allowances for equipment for use in the property by tenants you can claim Capital Allowances for equipment you buy to run your rental business. For example, tools with an expected life of more than two years, which you use to maintain your let properties or a computer if that's what you use to administer and manage your rental business. However, you must limit your claim proportionately to account for any non-business use. 

Businesses now to use the MTD system after April 2019.

Businesses will not be compelled to use the Making Tax Digital (MTD) system until April 2019 and then only to meet their VAT obligations, the Treasury has announced. This will apply to businesses that have a turnover above the VAT threshold. The smallest businesses will not be required to use the system, although they can do so voluntarily.
Mel Stride, Financial Secretary to the Treasury, said the government had listened to concerns about the pace of change and was taking steps to ensure a smooth transition to a digital tax system.
The Treasury stated that, under the new timetable:
  • only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes;
  • they will only need to do so from 2019; and
  • businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.
MTD will be available on a voluntary basis for the smallest businesses, and for other taxes. As a result, businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system. Further, since VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than now.
All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.
An online tax forum and dedicated webchat service for small businesses and the self-employed has been launched by HMRC.

The intention is to give the UK small businesses a quick and easy means of obtaining answers to their tax questions, as well as help with:

  • starting a business;
  • support for growing a business including taking on employees and expanding;
  • buying and selling abroad;
  • completing tax returns; and
  • tax credits.

Linked to the forum, HMRC's dedicated webchat service offers direct support to businesses and the self-employed.

A pilot was launched in March 2017, since when the forum has grown to have more than 1,000 registered users.

It does not deal with questions about taxpayers individual circumstances and comments that include personal information will be deleted.