Refurbishing a buy-to-let property and cost allocation Please note that the online tax calculators may not look right on a mobile device. You are recommended to view the tax calculators on a desktop/laptop You may have purchased a buy-to-let property investment and now wish to renovate it. Are the costs you incur refurbishing your rental property allowable to be offset against your rental income or is it capital? The refurbishment costs will reduce your taxable property profits if they are allowable. Capital costs to help you reduce CGT when the buy-to-let property is sold Costs that are not allowable will be capital and will reduce the Capital Gains Tax (CGT) when you sell the buy-to-let property investment when sold. In this case you will want to know how to reduce Capital Gains Tax (CGT) when selling a buy-to-let property investment. Reduce Value Added Tax on your buy-to-let refurbishment costs When refurbishing your buy-to-let property, you also need to think about Value-Added-Tax also called VAT. The standard rate of VAT is 20% but there are ways of reducing this from 20% to 5% or even 0%. Make sure you are aware of all the ways that help you minimise your refurbishment costs. Keeping receipts for HMRC self-assessment tax enquiries HMRC may enquire into your self-assessment tax return. They may wish to see proof of the expenditure you have allocated against your property income. Proof means receipts to demonstrate to HMRC that you have incurred these costs. Here are some best practice techniques to help you get through any HMRC self-assessment tax enquiry – Keep your physical receipts in box files for each tax year (up to 7 years, it can be less, but it is best to keep them as long as possible). Did you know that HMRC can go back 20 years if they feel you have committed fraud, not six years that is publicly stated? – Keep an electronic copy of your receipt using online bookkeeping software or online storage folders. This is a great way to safeguard yourself if your receipts are lost or damaged. – Keep your expenditure receipts with your self-assessment tax return. You can hand over the self-assessment tax return to HMRC upon enquiry. HMRC can review all the expenditure receipts without you having to scramble around, which causes more stress and anxiety. – Keep your bank statements for the self-assessment tax return year together. This allows HMRC to review all your expenditure summary formats – Have one bank account for your buy to let property business. This means that you have a personal bank accountant(s) and another for your property-business activities. Get ready to use the UK revenue or capital costs allocation calculator This free UK buy-to-let revenue or capital costs calculator will help you work out the allocations of your refurbishment in your accounts. Please note that the online tax calculators may not look right on a mobile device. You are recommended to view the tax calculators on a desktop/laptop
Refurbishing a buy-to-let property and cost allocation Please note that the online tax calculators may not look right on a mobile device. You are recommended to view the tax calculators on a desktop/laptop You may have purchased a buy-to-let property investment and now wish to renovate it. Are the costs you incur refurbishing your rental property allowable to be offset against your rental income or is it capital? The refurbishment costs will reduce your taxable property profits if they are allowable. Capital costs to help you reduce CGT when the buy-to-let property is sold Costs that are not allowable will be capital and will reduce the Capital Gains Tax (CGT) when you sell the buy-to-let property investment when sold. In this case you will want to know how to reduce Capital Gains Tax (CGT) when selling a buy-to-let property investment. Reduce Value Added Tax on your buy-to-let refurbishment costs When refurbishing your buy-to-let property, you also need to think about Value-Added-Tax also called VAT. The standard rate of VAT is 20% but there are ways of reducing this from 20% to 5% or even 0%. Make sure you are aware of all the ways that help you minimise your refurbishment costs. Keeping receipts for HMRC self-assessment tax enquiries HMRC may enquire into your self-assessment tax return. They may wish to see proof of the expenditure you have allocated against your property income. Proof means receipts to demonstrate to HMRC that you have incurred these costs. Here are some best practice techniques to help you get through any HMRC self-assessment tax enquiry – Keep your physical receipts in box files for each tax year (up to 7 years, it can be less, but it is best to keep them as long as possible). Did you know that HMRC can go back 20 years if they feel you have committed fraud, not six years that is publicly stated? – Keep an electronic copy of your receipt using online bookkeeping software or online storage folders. This is a great way to safeguard yourself if your receipts are lost or damaged. – Keep your expenditure receipts with your self-assessment tax return. You can hand over the self-assessment tax return to HMRC upon enquiry. HMRC can review all the expenditure receipts without you having to scramble around, which causes more stress and anxiety. – Keep your bank statements for the self-assessment tax return year together. This allows HMRC to review all your expenditure summary formats – Have one bank account for your buy to let property business. This means that you have a personal bank accountant(s) and another for your property-business activities. Get ready to use the UK revenue or capital costs allocation calculator This free UK buy-to-let revenue or capital costs calculator will help you work out the allocations of your refurbishment in your accounts. Please note that the online tax calculators may not look right on a mobile device. You are recommended to view the tax calculators on a desktop/laptop
