Posted by Simon Misiewicz on 2nd May 2014
Are you getting a tax cold?
Would you like some good warming news?
Tax issues need to be diagnosed in order to be understood for a remedy to be implemented.
Many of the assets that we buy in a property are tax allowable. I am getting a good reputation through my tax talks about “Replacement and Repairs” where these costs can be offset 100% against your tax liability.
For more information on “Replacement and repairs please see reference point (1).
However, I also stated that any improvement costs cannot be considered to be tax allowable. For more information on Improvement & capital costs see reference point (2).
Applying the right tax reducing medicine to your tax illness.
There is some good news. LESA is here to save the day and allow you to claim 100% of any energy improvement costs that you incur in your property investments.
LESA stands for Landlord’s Energy Saving Allowance.
You can claim Landlord’s Energy Saving Allowance for the costs of buying and installing the following energy-saving products for properties you rent out:
• cavity wall and loft insulation
• solid wall insulation
• hot water system insulation
• floor insulation
The types of properties LESA applies to are:
• A building that only partly comprises of “let residential” property
• A building containing more than one dwelling house
• A property that is let by more than one landlord
For more information on the types of properties please see reference point (4).
This is particularly important if you are paying the bills in a HMO. The better the heating (and keeping in the heat) the less expense you will incur. You can consider this a Return On Improvement (ROI) strategy as well as a taxation point.
Applying the treatment
Now we have identified the treatment here are a few ways that you can apply it to your tax pains.
You can claim a maximum allowance of £1,500 for each house, flat or bedsit that you rent out. For example, if you rent out a building that contains 4 flats, you can claim up to £1,500 for each flat.
If you own the property with others, you can claim a share of the allowance in one of two ways:
• based on the amount of the property you own (eg if you own half of the property you can claim up to £750)
• based on the amount of money you spent on the improvements (eg if you covered half of the costs, you can claim up to £750)
Owners can claim a maximum £1,500 in total for each property owned.
For more information on how much money you can claim please see reference point (3)
You can claim these costs under ‘allowable business expenses’ on your Company Tax Return form – if you rent out your property as a business.
Please note that you cannot claim LESA tax allowable expenses on the following properties:
• a “rent-a-room” relief in respect of the dwelling house
• If the property business includes the commercial letting of furnished holiday accommodation
• If the expenditure is incurred in respect of “energy-saving” items in a dwelling house which, at the time when the items are installed:
- is in the course of construction, or
- is comprised in land in which the person claiming the deduction under this section does not have an interest or is in the course of acquiring an interest or further interest.
For more information on when costs become dis-allowable please see reference point (4).
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1. Changes To Capital Allowances 2013
2. Claiming 100% Refurbishment Costs
3. Landlord’s Energy Saving Allowance
4. HMRC – Deductions – General Rules – LESA