HMRC to target buy-to-let landlords
- 25th January 2012
- Landlord Property News
Last chance for landlords to finalise accounts as January 31st self-assessment deadline looms.
More tax investigations in 2012 by HMRC means that landlords need to be particularly careful to avoid errors in their tax returns.
The cost of dealing with a tax investigation, even if it proves to be groundless, could put a serious dent in the profitability of a buy-to-let investment.
With the 31st January deadline just days away, it is the last chance for landlords to finalise their accounts.
Despite greater pressure from HMRC, it’s important that landlords continue to make use of all the tax breaks available to them. Examples of rental tax deductibles include letting agent fees, legal fees, accountants’ fees, building and contents insurance and repairs.
Stephen Ludlow, Chairman of ludlowthompson comments: “It is very common for errors to creep in when it comes to claiming on deductibles and finalising end of year accounts for an investment.
“Using an accountant takes away the hassle and the professional fees are tax deductible.
“A common error is to claim the cost of building work, which is an improvement to the building rather than just maintenance. While repairs are tax-deductible, improvements are not.”
Other common errors include:
- Legal fees related to the purchase or sale of a property are included in its cost base and are not tax-deductible. However, legal costs incurred in the day-to-day operation of the property, e.g. drawing up a lease, disputing with tenants, etc, are tax-deductible.
- Interest on loan repayments is tax deductible if the loan is used to generate buy-to-let income. If some of the loan is used for private purposes, such as to purchase motor vehicles or other goods or services, the interest on this portion of the loan is not tax deductible and should not be claimed.
- If the property is used by the investor or their family and friends free of charge for part of the year, costs incurred during this period are not tax deductible.
Using an accountant takes away the hassle and the professional fees are tax deductible.
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