PROPERTY: Is your rental property let at market rate?

How much you charge for the rent on your property is largely up to you. HMRC don’t have a say in this as such, although, they do have the power to restrict the value of expenses that are allowable for tax purposes. Typically, expenses for a rental property that are incurred “wholly and exclusively” for the running of the property, are considered allowable for tax relief against rental income. However, where a property is rented at less than market rent, or, in some cases, rent free, then expenses may be deemed to fall outside of the “wholly and exclusively” rule. In this case, HMRC allow expenses to be claimed up to the value of the rental income so that no profit, yet no loss is made. Genuine rental property losses can be offset against future profits. Where rent is less than market value though this does not apply. Properties let rent free in fact fall outside the scope for property income tax unless it can be demonstrated there is an intention to re-let at a market rate; i.e. the owner is actively looking for new tenants. Figurit can help with your rental property accounts and tax advice thereon. Please call our experienced team if you need guidance around how to structure your rental property and reduce tax where possible. T: 020 7376 9333 E:

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