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Hi, Sam here , one of the UK tax Experts here on Just Answer, thank you for your question and I shall reply shortly
Thanks for your patience
I am afraid you cannot deduct this retained amount as it still forms part of the income/rents collected for the year - all I can propose is that you ask for the estate management firm to hold a smaller retainer.
But this also happens in normal residential let situations where a managing agent retains an amount for any maintenance/repairs - but it still arises as part of the rents you are due and that have been collected, its just distributed elsewhere - but still is an amount that has to be considered within your (the landlords) income position
So the way you have been declaring this has been correct and must continue this way. Even if this still pushes just into the 40% tax bracket so your only solution is to come to some better agreement with the management company
Let me know if I can assist further
It seems an excessive amount for them to retain - considering the rents collected ! But yes if this retained amount was to be spent on maintaining/repairing then this would reflect through the next 6 months r following years accounts at which point you could claim this as a general repair to reduce the gross rent position
No the holding of a small retainer would not reduce the rental position but then you have a a bigger income position to cover the tax due on -
If you remin higher rate - you could consider taking some of the net rental income to put into a personal pension plan - but this would be dependent on your age and how much you pension pot sits at (as this the would attract a further 20% tax relief through your self assessment -as 20% at source and 20% to counteract the higher rate tax position
But as everyone else you are getting £11850 tax free and then paying 20% tax on an amount up to the next £34500 so you still end up with 80% of the rents in your pocket!!