The following Property Income is assessable to tax:
- Rents under any lease or tenancy agreement.
- Premiums received on the grant of a short lease.
The basis of assessment is on a CASH BASIS (rental income received less allowable expenses paid). However, an ACCRUALS basis can be chosen by the taxpayer if they prefer. An ACCRUALS basis MUST be used if Property Income exceeds £150,000.
- Management agent fees
- Cleaning costs
- Motor expenses (using HMRC approved mileage allowance)
NOTE: FINANCE EXPENSES for RESIDENTIAL PROPERTY are NOT allowable deductions BUT do give rise to a TAX REDUCTION at the BASIC RATE OF TAX.
No Capital Expenditure
CAPITAL EXPENDITURE is not allowable but REPAIRS are allowable deductions.
Replacement Furniture Relief
For Residential Lettings that are either partly or fully furnished there is NO tax relief for the initial cost of the furniture BUT there is REPLACEMENT FURNITURE relief when the furniture needs to be replaced. The REPLACEMENT FURNITURE RELIEF is reduced by the proceeds from selling the item that is replaced. Also, if the FURNITURE is replaced with with a item that is an improvement on the previous item, then no relief is provided on the upgrade of the item.