Before we can answer the question we need a bit more detail.
How are the properties let?
Furnished? Unfurnished? Short Term lets? Holiday homes? are both properties in the UK? Are the mortgaged or purchased outright? If mortgaged were such on loans specifically for these properties in order to rent them out?
On the maintenance question, sometimes the line between what is maintenance and what is an improvement can become a little blurred.
On the car front there are two options. Either use the official mileage rates of 45p per mile for the first 10k miles and 25p per mile thereafter or take total running costs (maintenance/petrol/etc. (not cleaning it)) then keep a record of every time that you legitimately visit the properties without that journey being part of another hourney for other reasons. Divide the property related miles by total miles in the period (helps if you tie that in with MOTs or servicing in order to keep evidence) and then multiply the total (legitimate) running costs by the resultant figure.
For example
Total mileage in year : 12000 Business mileage : 400 miles
Running costs option : Total running Costs :£4000
Therefore : 400/12000 = 0.033333 So £4000 * 0.033333 means that £133.33 could be claimed against the business.
Business mileage option
400 bussiness miles * 45p = £180 tax free
Let us know your annual mileage, estimated annual motoring expenditure and expected mileage necessarily incurred visiting the properties and it's easy enough to knock up a quick calculation to see which option is best for you... I will say though that from experience I can count on one finger let alone one hand the number of times that the result has not come down on the side of the 45p/25p per mile.
Note that the capital expenditure on purchasing the car is NOT part of the motoring expenditure. Such is purely the running costs.
With either option the journeys must be made wholly, exclusively and necessarily for the purposes of the business and the mileage must be recorded.
Please supply the first requested details relating to the types of rental property and I'll let you know the expenses that you can claim. (also the motoring expenses if you want a quick bit of advice on which route would be more beneficial to you).
kind regards,
Shaun.
-- Edited by Shamus on Saturday 29th of September 2012 04:25:44 PM
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Just need a bit of info regarding allowable expenses for a landlord..renting out 2 properties.
I know repairs are fine, improvements aren't. Not sure on the petrol/car front? The car isn't wholly for business use. Can anything to do with the upkeep of the car be put through as an expense..IE Windscreen repair/Fuel/Carwash?
Thank you very much for your reply! I'm really busy at the moment so will get back with the details later. In the meantime I will use the info you provided. Thanks again!
The house would appear to have been financed in the wrong way to gain any tax relief on the interest.
The mortgage that you need is in the form of a loan taken out specifically against he property known as a buy to let mortgage. These are calculated in a different way to normal mortgages based on multipliers of rental income and are quite seperate to your main mortgage (They are treated as business loans and the letting business is treated as a legitimate business).
No claim can be made for the house with a family member residing in it.
Look into the cost effectivenes of taking out a mortgage on the house purchased outright as that is tax decuctable whereas the mortgage on your primary residence is not (fill in the gaps on that answer. I'm not going to write down what you should do here).
For the house with the wrong mortgage on it changing over now may prove more expensive than the tax saving. However, even had such relief been available the fact that a family member is in it means that you could not have claimed it anyway (including repairs).
For the house let out unfurnished all genuine expenses of a non capital nature are allowable. Just no 10% allowance is available as it is let unfurnished.
Capital expenditure adds to the value of the house so is not expensed.
When the house with a family member in it is let out the expenses must be allocated on the basis of tennant occupancy only. For example. if a family member occupies the property for 12 weeks, the property is available to let (unoccupied) for 40 weeks and of those is let to a paying tennant for 20 weeks then expenses will be calculated as (lets use £500 as an example figure).
£500 / 52 * 40 = £384.61
Note there that although not let it was available for let so the expenses are allowable.
Exceptions to this are things such as advertising costs which would be 100% allowable. so, taking the above £500 lets say £100 was advertising costs. The allowable expenses then would be :
£100 + (£400/52*40) = £407.69
The figures are contrived but I think that you see the general principle there.
general rule is that to be treated as a business then it must be run as a business.
kind regards,
Shaun.
p.s. note that considering the way that it has been financed there may be capital gains advantages to having the house that is being lived in by a relative as your main residence for a while dependant upon when you are looking to sell the house (avoid having it as your main residence for more than three years though).
I would strongly advise that you seek professional advice from a qualified accountant in order to minimise your ongoing tax liabilities. Unfortunately I fear that you may already have cost yourself considerably more than you would have paid to an accountant due to the mortgage mistake. However, a good accountant looking at the actual figures should be able to tell you how to rectify this or indeed whether it will cost more to rectify than you would gain by taking action.
Amended only to add the P.S.
-- Edited by Shamus on Sunday 11th of November 2012 06:32:00 PM
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Relating to the mortgage interest bit, if the primary residence was remortgaged to provide the funds to purchase the rental house, I would disagree. I had this come up and was not sure so I rang HMRC to ask about the interest on a loan for a house and I was told catagorically that it didnt matter where the money came from, it could be a loan from a family member, a re-mortgage on another property etc. If the money from the loan was used wholly (or pro ratad if not) to purchase the property that was rented out then the interest portion was absolutely able to be used as an expense item aganst the rental income.
that was not however the stance taken by HMRC in William Green v Revenue and Customs (2011)
The courts decision was to base their decision (in favour of HMRC) on the actual borrowing, not the borrowing as intended (namely the loan to not relate to the business and therefore the interest was not allowable).
This one is likely to be a case of the answer you get from HMRC depends upon who you talk to.
That of course also means that the treatment may be different depending on who reviews the case.
For my part though I would be adverse to advise any client to mortgage their own home to purchase a buy as anything other than a transient arrangement pending establishment of more suitable financing arrangements particular to the property business.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
