SMF - Just Installed!

Tax return - allowance vs expenses

Started by PaulaC, January 15, 2023, 09:14:57 PM

Previous topic - Next topic

PaulaC

Hi,
I'm a new landlord and I'm just filling in my online self-assessment tax return for 2021-22. 
I understand there is a £1000 tax-free allowance on rental income but I don't understand whether this is as well as, or instead of, deductible expenses. 
As this was my first year of letting I had quite a few expenses (agent's tenant finder fee, electrical safety check, locksmith, oven repair and landlord's insurance) which add up to over £1000 and I have receipts for them.  If it is a case of choosing either £1k allowance or expenses I would clearly be better off choosing expenses, but I'm not sure from the online form whether this is the case.
I've used my £12,570 income tax allowance due to my job and my rental income and job income combined are in the basic rate of 20%. 
Thanks for any advice!
Paula


jpkeates

The £1000 tax free allowance is there for people who's income is trivial, if your income (ie. rent received) is more than £1000, you need to tell HMRC about it - so that they can advise how they want to collect the income tax (probably by annual self assessment).

For anyone else looking for an answer, the £1000 is an alternative to claiming your actual expenses, you can't do both.

PaulaC

Thanks for the quick reply and thank you for clarifying that I need to choose either expenses or £1000.  I guess it makes sense to deduct expenses as they are higher than £1000.
I have another question about expenses - some were incurred before the 21-22 tax year as I was getting the flat ready to rent out e.g. electrical testing, changing the locks... can I still include those even though the dates on the invoices were in the previous financial year?  I understand I don't need to submit the invoices with my return but could be asked for them afterwards.
My rental income isn't huge but is over the threshold for reporting and I have already registered with HMRC for self-assessment.
Thank you,
Paula

jpkeates

Expenses related to setting up the rental business are claimed as though they were incurred on the first day of the first tenancy - which is the day your business begins to trade for tax purposes. The actual dates the expenses were incurred don't matter (as long as they were less than six years ago).

Don't forget to include the council tax and utilities from the period it wasn't being let.

PaulaC

Thanks again!  The expenses were incurred within 4 months before the start of the 2021-22 financial year so I will include them then, thanks that's good to know!