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bigduckontax
bigduckontax, Accountant
Category: Tax
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Hi, I bought 3 buy to let properties last year (2013/2014

Customer Question

Hi, I bought 3 buy to let properties last year (2013/2014 tax year). What buying costs are tax deductible?

Mortgage application fee? (if Yes, does it make a difference if I paid it as a lump sum upfront or if I added the cost to the mortgage?)

Legal fees?

Survey fees?

Stamp duty?

Any other costs related to their purchase?

Thanks
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

Right, you have to bear in mind 2 different taxes, Income Tax (IT) and Capital Gains Tax (CGT). They are entirely different taxes.

All the expenses you list inflate the purchase price of the properties for CGT for which will you will ultimately become liable on the disposal of the properties. You receive no immediate relief from this expenditure. If you make improvements to the properties, eg put in new kitchens etc the cost of these improvements also increase the purchase price for CGT. When you sell this figure is deducted from the selling price, less costs, to calculate the capital gain, or loss. You have an annual exemption allowance of GBP 11.9K to help and there will be Letting Relief too, so when selling up consider staggered sales over successive tax years.

For IT purposes the interest, and interest only, paid on the mortgages is allowable against IT and forms part of the expenses of running your buy to let business. Any day to day repairs are also allowable against IT, but many landlords use the 10% allowance against rentals, a rough and ready twist of the spoon to stop the treacle running off as it were. It makes for easier accounting!

There you are; a quick canter through your question which I hope has helped. Have a look at the UK Government web site 'Renting out your property (England and Wales).' This gives an excellent resume of the subject. Any search engine will find it, no problem. You may find it useful to employ a letting agent, but they cost, as indeed will a solicitor or accountant to help you, but you could bear these specialists in mind should youi need them. Use a local, trusted agent, always better. You will almost certainly need expert advice when selling to reduce the CGT exposure.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.

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