Tax Tips for your rental property
If you own a rental property you may or may not be up to date with some of the tax considerations so here is a short summary of a couple of important factors.
Private lettings relief
If you own a rental property that was once your “Principle Private Residence” then there is” Lettings Relief” available to you against any gain when disposing of the property. This can be worth £40,000 for an individual and £80,000 for a couple, if the property is owned jointly.
Wear & tear allowance
The 10% annual allowance for “wear & tear” is available only on furnished lets. This specifically means that the property must include cooker, fridge, sofa, bed etc. to classify as “furnished”.
The 10% is calculated on net rental income received. “Net” means after deductions have been made for costs you as the landlord cover which would usually be the tenant’s responsibility. This could include Council Tax for example.
Property profits do not have to be allocated in an equal 50:50 split when a profit is owned jointly, even if the legal ownership is in fact split this way.
This can be particularly beneficial where one person is a higher rate tax payer and one is not, where one person has other property that is subject to tax and one does not.
This allocation can also change each year as the property owners see fit and to clarify that the allocation does not apply to capital apportionment on any sale of the property.
It is worth getting an agreement in place that is separate to the property deed.
Need more rental property guidance?
As always, property tax can be a daunting subject and these are just a few tax tips to give you some food for thought.
Please contact Figurit if you have specific questions that we can help with.