Posted by Simon Misiewicz 22nd December 2014
Are you finding the cost of refurb a major pain? Are you putting furniture into your properties?
If you have answered yes to either of the above questions then this article is for you.
Tax issues need to be diagnosed in order to be understood for a remedy to be implemented.
The cost of electrical items such as fridges, TVs, coffee machines etc are not allowable for taxation purposes. You therefore need to invest the money without the benefit of a tax deduction.
However, you may recall from one of my old articles that you can claim 10% of the net rent for furnished properties. Therefore you could argue that you already get a tax benefit (1) (2).
This still does not solve the issue of cash flow as you still need to spend the capital cost.
Put it this way, if you rely on your limited company for investment funds and you pay for furniture and white goods then you will be taxed on the wages / dividends that you take from the company (3).
Applying the right tax reducing medicine to your tax illness.
If you rent from a company like Forbes Rentals, (4) then you can offset the rental cost of the electrical items against your taxable income. For example you can rent a washing machine for £2.99 per week.
You may think that this is expensive and for sure it is more than paying for it yourself. The cost of the washing machine for one year would therefore be £2.99 X 52 = £155.48.
However you would save the tax on this £155.48 cost. If you were a basic tax payer then you would save 20% in tax of £31.10. The actual cost of the washing machine is therefore reduced to £124.38.
Not only that but companies like Forbes Rentals will deliver the machine and fit it. Another cost that you would have to pay for if you purchased the machine yourself (in some instances).
If you are looking for an accountant or thinking of changing your current accountant because they do not understand property investing then please book an “Initial Free Consultation” on the below website: http://www.optimiseaccountants.co.uk/event/initial-free-consultation-2/
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