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Thursday, July 01, 2010

Landlords - know your tax liability

Letting a property can be a legislative and economic minefield. As a landlord you should always ensure that you are up to date with current legal requirements, health and safety duties, and of course, your tax liability.

As a landlord of a rental property, it is essential that you know how much tax you have to pay and also which areas can be written off as non-taxable expenses. Any rental income you receive from letting out your property must be declared, as income tax is payable.

However, there are a number of deductions or allowable charges that you are permitted to make as non-taxable expenses. These expenses are permissible in the instance that they are incurred exclusively for the rental business. This does not include expenses of a capital nature, such as land costs, buildings, or alterations and improvements.

Some of the current expenses that are normally deductable can include; accountancy expenses (solely for rental business accounts and not personal tax returns), marketing costs to find new tenants, inventory charges, rental property cleaning, rent collection costs, Council Tax where properties are vacant but available for letting, gardening, water rates and repairs which are not to significantly improve the property. There are also many more non-taxable expenses landlords can claim.

It is essential that you retain all paperwork regarding your rental property, such as contracts and mortgage account details, as well as all bills and invoices, to ensure that you can supply the relevant information as and when required.

Knowing how to reduce your tax liability effectively and justifiably is an integral part of managing a rental property or portfolio. By seeking expert advice and guidance, you can ensure that your rental business is legitimate, you are not paying unnecessary taxes, and above all, that you are aware of all elements regarding your tax liability as a landlord.

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