What Tax Expenses Can Ayr Landlords claim against?
A guide for Ayr landlords to declaring their rental income in the best way possible and what you can claim against.
If you rent out a property and receive a rental income from that, you must declare it. You have to pay tax on any profit. It doesn’t change your employment status to ‘self-employed’ though, as it’s considered an investment.
Of course, HMRC can be more complicated than a day at Hogwarts. The best advice will be to seek professional advice from an accountant but we’ve picked out some key points to start you off.
Start hoarding
HMRC unimaginatively call this ‘record keeping’. Be disciplined and keep receipts, bank statements, invoices, rent books, even mileage logs, so you (or your accountant) can easily make the deductions against your tax bill. This means you get to keep more of the profit away from ‘the tax man’ in a legal and ethical way, of course.
Expenses claims
There are a range of other allowable expenses. They are deductible only if they’re exclusively for renting out a property and if you pay for them yourself. This could include:
- Water, council tax, electricity, and gas
- Insurances
- Services of, for example, cleaners or gardeners
- Accountancy fees
- Ground rents
- Service charges
Maintenance and repairs
The definition from the gov.uk website is: ‘A repair restores an asset to its original condition, sometimes by replacing parts of it’.
If the property requires new guttering after a storm, this would be considered a repair and therefore, a deductible expense.
However, if you wanted to improve the guttering for another reason, like changing the colour, this would not be allowable.
Improvements are not an allowable expense, like replacing a laminate kitchen work surface for granite. The exception to this is updating things to their ‘nearest modern equivalent’. This could be things like changing single-glazing to modern, double-glazed windows.
If you replace an item with an upgrade, then you can claim the cost as if you had replaced like-for-like. Take the work surface example: a 2m length of laminate would be £150. The same size granite work surface could be £600. You could claim the £150, not the £600.
Domestic item replacement
Furnishings like carpets and curtains are likely to be able to be deducted, as long as you’re replacing like-for-like. Beds and free-standing wardrobes, or other items that can be considered ‘movable furniture’ are also deductible. Appliances, such as TVs or fridge/freezers, and even smaller items, like cutlery and crockery can be offset against your income.
Partial expenses
If you’re letting a property that you have a mortgage on, you can’t deduct the full amount of the mortgage payment. You can only offset the interest element of the mortgage repayment against the income. Similarly, if you use your car for a purpose related to the rental property, you can only deduct the vehicle running costs for that particular purpose. This includes mileage rate deductions.
For rental opportunities in Ayrshire, get in touch with us on 01292 442888. I specialise in Lettings and Lettings Legislation and can help you consider the market and the best options out there for you.
COPYRIGHT Parkview Property 2022
Buy To Let Property, should you use a Ltd Company?
Should you set up a Ltd Company for Your Buy To Let Property? Before becoming a landlord, you need to consider how you want to buy your rental property. There’s lots of tricky tax stuff to consider and changes to tax relief over the last few years mean that becoming a landlord might not be as profitable as you first think.
So, what should you do? Should you buy a rental property in your personal name or via a limited company?
Setting up a limited company
Since 2016, more private companies than ever before have been set up to hold buy-to-let properties (primarily because of tax changes) and it’s relatively easy to do. Whether you’re starting a company on your own or with others, it’s a matter of choosing a name, deciding who does what, having a company address, and registering online with Companies House.
Keeping the accounts and records for a limited company can be a lot more complicated than personal tax, so it’s always advisable to hire an accountant. In addition, proper accounts are a legal requirement when running a limited company, so by hiring a professional you can have peace of mind that things will be done the right way.
Taxing stuff
Tax. Ugh. A word that makes everyone feel slightly sick. And when you’re a landlord, it’s an area you need to get your head round.
Over the last few years, the government has brought in several tax changes that impact private landlords with property in their own names and their level of tax relief. In simple terms, this means less profit and more tax.
Limited companies now hold more tax advantages for landlords. For example, a limited company can still treat mortgage costs as an expense along with other related costs of managing a rental property. In addition, limited companies are subject to corporation tax which is currently set at 19% (although this is set to increase), instead of income tax, which changes depending on your rate of pay.
Other tax areas to investigate if thinking about setting up a limited company include:
- No capital gains tax
- Inheritance tax issues (if you plan to pass your property on)
Always speak to an accountant or financial advisor when it comes to tax matters.
If you’re thinking about buying a rental property, please speak to us at Parkview Property.
Are You a Landlord or a Property Investor in Ayr
Are you a Landlord or a Property Investor? What’s the difference? Aren’t they the same thing? Does one rent out properties and the other sell them on? If these questions have got you scratching your head, read on.
Keeping it simple, a landlord makes a regular income from renting properties to tenants. They are responsible for maintenance and managing the property. It’s also likely that they hold onto the property for the long term.
A property investor is trickier to define. It might be someone who buys buildings they can add value to before selling on, or someone that invests in other people’s property ventures, not getting involved in the actual build or refurb.
Hands-on vs hands-off
A private landlord has got a lot to do. Once they’ve bought, financed, and refurbished their rental property, they enter the wonderful world of lettings. And while many landlords use our agency to find tenants and manage their property (the easiest decision in my humble opinion), many choose a more hands-on approach. So, they manage the property, taking care of tenant enquiries, emergencies, or repairs.
Being a landlord can be a full-time job, depending on the number of properties and tenants they may have.
A property investor takes more of a back-seat role. For example, they may be part of a joint venture or involved in an equity partner agreement. This is where they put up the capital and other parties do the work.
Property investors with access to a large amount of money may take more indirect routes to their investments such as property funds or trusts, buying shares in large development companies or property ISAs. In each instance, they commit their cash, rather than their time.
Regular income vs one-off payments
A private landlord looks for a good rental yield as a stable and relatively low-risk property investment. They receive monthly rental payments that should cover mortgage costs and could (hopefully) supplement their income. Over time, if they sell their rental property, they may also benefit from price appreciation. Nowadays, many private landlords regard property as an alternative to a traditional pension.
Property investors buying buildings to ‘flip’ or develop look for a one-time payoff once they’ve sold the property.
I deal with both, therefore If you’re interested in becoming a landlord or investing in property, call me on 01292 442888
Rental Guarantors and Ayrshire Landlords
This three-minute read explains the role of rent guarantors.
When a landlord has a niggle of anxiety over whether a prospective tenant will pay their rent, there is a way they can help protect their investment.
A landlord can ask a tenant to provide a guarantor to ‘guarantee the tenancy’.
Guarantors are often family members or close friends – and a little bit like a human safety net.
If the tenant can’t (or won’t) pay what they owe the landlord, the guarantor has to stump up the cash – or face the landlord at a Tribunal.
Extent of liability
As with so much in the lettings game, it all depends on the terms of the contract.
While some agreements only cover unpaid rent, others will also cover things like damage to the property.
An agreement should clearly state what is covered and outline the circumstances under which the contract will end.
This is important. If the guarantor has a change of heart mid-tenancy, they can’t simply walk away from their commitment. The agreement is legally binding.
When to use a guarantor
It comes down to the landlord’s discretion, but often a guarantor is used when a tenant:
- Is new to renting.
- Has gaps in their employment history or has recently started a new job.
- Is a student.
- Has a credit rating that is lacking in some way. That doesn’t necessarily mean the tenant has had financial problems; they may be young and have never had a credit card or other loans.
Important points
- A landlord must check a guarantor’s credit and employment records closely (just as you would with a tenant). Guarantors are often required to own a property and have a gross annual income three times the rent of the rental property they are acting as a guarantor for.
- Most landlords prefer the guarantor to be UK-based as it’s easier to run credit checks on them and take legal action if required.
- Issues can occur when people agree to be the sole guarantor on a rent agreement without realising this makes them liable for all outstanding rent and damage costs. For example, a mother agrees to be a guarantor when her daughter moves in with her boyfriend. However, the couple split, the ex-boyfriend disappears, and Mum is livid that she has to cover his payments.
- Landlords must ensure that a guarantor understands what they’re signing, or they could claim that they were misled or pressured into an agreement.
For more information on any aspect of renting out a property, contact me, Janice Molloy, Tel: 01292 442888
Common Ways Your Ayrshire Home Could Be Making You Ill
For most of us, our home is a haven. But what if it is making you ill?
Mould and damp
Mould and damp are caused by excess moisture in the home – perhaps due to leaking pipes, roof damage, or condensation build-up. They can cause respiratory issues, nausea and vomiting, and general illness, so it’s important to stay ahead of any fungal growths or damp patches.
Quick tips to prevent mould are:
- Air your bathroom when bathing to get rid of condensation
- Keep your home well ventilated to avoid excess moisture
- Where you notice mould, wipe it away with detergent or mould treatments (in more serious cases, call in the professionals to get rid of it)
- Hang your wet laundry outside or by an open window to prevent moisture build-up.
Excess dust
No matter how clean your house is, dust and dust mites can be found within most properties. They are a common allergen and can cause asthma symptoms. Ongoing exposure may result in allergic rhinitis (runny nose, watery eyes).
Reduce dust and mites by:
- Regularly vacuuming carpets and mopping floors
- Dusting with a damp cloth
- Change bedsheets weekly and wash in warm water
- Vacuum upholstered furniture, such as sofas.
Carbon monoxide
It’s important to have a working carbon monoxide monitor in all properties, as this gas is a silent killer. Some causes include poorly installed and/or badly ventilated appliances, such as cookers and boilers, blocked flues or chimneys, paint fumes, and smoking indoors.
Early signs of carbon monoxide poisoning include an ongoing headache, dizziness, sickness, and shortness of breath.
Cleaning products
While a clean home is important, limit your use of cleaning products such as oven cleaners, bleach, and aerosols. All of these contain chemicals that can cause irritation to the eyes and throat resulting in headaches and breathing issues.
Lead paint
Lead paint was banned in the UK in 1992 but can still affect older properties. Once lead paint starts to crack or peel, its dust can cause serious problems, especially for children and pregnant women.
If you suspect your older property has got areas of lead paint, speak to a building professional about how to get rid of it.
The good news is, what we’ve outlined above is very rare but if you’re concerned about any problems in your home, speak to us at Parkview Property.
Rent Increases: What Ayrshire Landlords Need to Know
In this three-minute read, we look at the issues Ayrshire landlords should consider before raising rents.
The uptick in inflation, along with pressure on interest rates, means that many landlords will be considering rent increases right now.
Before deciding on a course of action, here are some points to consider.
Why would a landlord raise rents?
- Rising mortgage and maintenance costs.
- Tax and legislative changes that impact profitability.
- Changes in the supply of and demand for rental properties in the local market.
When can a landlord raise rents?
It depends on the terms of the contract. Your tenancy agreement should clearly state how and when rents can be reviewed, and the notice period required for an increase.
It’s vital that you understand the terms of your contract and – unless you enjoy messing with lawyers and tribunals – abide by them.
If you’re unsure where you stand, contact us here at Parkview Property for independent advice.
How much should you raise rents?
It’s a balancing act as an OTT rent hike could cost you more in the long run.
To hold on to top tenants and enjoy good returns, do your research and play fair.
Look at what other landlords are charging for comparable properties in Ayrshire. Be honest about the condition of your property and determine your price accordingly.
Telling your tenant
Be upfront and start the conversation sooner rather than later. That way, your tenant will have time to adjust to the idea and budget accordingly. Always serve written notice within the required notice period.
What if my tenant is unhappy?
Explain that you’re facing rising costs and talk about any improvements you’ve recently made to the property.
If a tenant is happy and settled, they’re unlikely to bother with the expense of moving if a rise is reasonable.
If your proposed rise causes a stir, make a judgement call. Weigh up the costs of finding a new tenant and the risk of having the property sitting empty against the extra income you stand to make.
Look at the big picture. If your tenant is a keeper, consider negotiating. If you’ve had issues with them in the past, maybe it’s time to part ways.
Where problems occur
Issues arise when:
- A landlord is missing in action for a couple of years and then springs a massive hike on a tenant to make up for lost time.
- The rent is set too low initially, and the landlord tries to play catch-up by introducing a big hike when they can.
- Tenant/landlord relations are so poor that rational conversation isn’t possible.
- A landlord doesn’t understand their contract and tries to bulldoze through a hike at the wrong time.
To avoid these issues:
- Get professional advice from an experienced letting agent so that you set the rent at the right level the first time.
- Have a long-term rental strategy. Some landlords, as a rule, increase rents incrementally every year or two to cover rising costs.
- Ensure your contract is watertight and that you understand it.
- Communicate regularly with your tenant. If you’re time-poor, a letting agent can do it for you.
For advice on formulating a long-term rental strategy, get in touch with us here at Parkview Property.
How to Winter-Proof Your Rental Property
We look at how landlords in Ayrshire can make sure their rental investments stand up to the challenges of winter weather.
With winter officially only a few weeks away, the time is now ideal for landlords to take steps to ensure their properties are prepared for whatever December to February serves up.
By putting a winter property maintenance plan in place, you’re setting yourself and your tenants up for a trouble-free winter period.
Begin with boilers – The best time to service a boiler is in September, ahead of it being plunged into constant action in the months that follow. The second-best time to service a boiler is right NOW. By keeping on top of boiler and heating maintenance, you’ll save a lot of money and avoid hassle in the long run.
Remember your radiators – Bleeding your radiators is a simple, yet effective way of ensuring they are working as well as they should be.
Look at lagging – Frozen pipes that burst are the stuff of nightmares for any serious landlord. So, take the time to ensure pipes are wrapped in lagging to reduce the risks of freezing and potentially bursting.
Go to guttering – Don’t wait until the weather turns before you clean out your gutters. Blockages can build up over time and slowly cause unseen damage.
Insulate everywhere – Insulating a loft is an excellent way of keeping the warmth in and the heating bills lower. But don’t forget that even insulating against draughts can be a small way of making a big difference to how warm a property feels.
Fix that fence – The stronger seasonal winds love claiming a poorly maintained fence as one of its victims. So, act now to ensure any weak spots in your fencing are ready to stand up to whatever the winter winds throw at it.
Check it out – If your property is vacant for any sustained period over the winter months, diarise weekly or fortnightly visits to it to keep an eye on things. If you can’t do this, then it’s the kind of thing a good, local letting agent can do for you.
Your rental property is an asset, and having happy tenants is a key part of making the most of it, so take the time and spend the money on creating a safe, comfortable home for them this winter.
And don’t worry if you’re not a Handy Andy or a DIY Diana. At Parkview Property, we have good working relationships with maintenance people who can do all the work for you.
Tenants Guide To A Stress Free Move
Step-by-Step Stress Free Moving Guide for Renters
In this two-minute read, we look at how renters in Ayrshire can take the hassle out of finding a place to live.
Are you looking to move into a new rental property? Here’s a guide to finding a new home.
- Research
Identify where you would like to live and what kind of property you’re looking for. For example, if you work from home, you might need office space. If you have children, you may want a garden. Having a clear idea of your needs means you won’t waste time looking at totally unsuitable properties. Once you’ve made up your mind, make a list of local letting agents.
- Budget
Itemise monthly expenses such as rent, council tax, and utility bills so that you understand what your outgoings will be (and to clarify if your choice of property type is within budget). Make sure you also factor in moving costs and set aside money for a deposit.
- Viewings
Finding a rental property is a bit like dating – sometimes it can take a while to find ‘the One’. It can be helpful to make notes (during viewings, that is, not dates – that would be weird, obviously).
- Be decisive
If you see a property that ticks all your boxes and is within budget, don’t mess about. Good properties are always in hot demand, let the agent know you are interested and ask for an application.
- References
Before you get the okay to move in, you’ll need to complete the application process by providing several important pieces of information. Expect to be asked for photo ID and your National Insurance number, along with bank statements and payslips (covering the past three months). The landlord will also seek references from your employer and previous landlord.
- Contract
Once the reference checking process is complete, you’re on the home stretch. All you need to do now is sign your contract. Always read any agreement thoroughly, and if you don’t understand something, ask for further explanation. At this point, you’ll also receive details about the electricity, and gas suppliers at the property. Note: You’ll also have to cover the TV licence and council tax.
And finally
Confirm your moving date and get packing!
For information about renting, or putting a property on the rental market, contact us here at Parkview Property
My name is Janice and I am always here to help 01292 442888.
A Landlords Dilemma
To Furnish or Not to Furnish? A Landlord’s Dilemma
In this two-minute read, we ask some questions you should think about before renting out your property in Ayrshire
Once the last lick of paint has been applied and the carpets have been laid, it’s time to decide whether or not to furnish your rental property.
It’s a question that has many landlords scratching their heads. Does a furnished property command a higher rental yield? Or is it more hassle than it’s worth?
What type of rental property do you have?
Certain rental properties need to be furnished. For example, if you own a House in Multiple Occupation (HMO) it’s wise to provide furniture, even if it’s the basics of just a bed, wardrobe, and chest of drawers.
Freehold properties are best left unfurnished so that tenants can make the property more homely.
What type of tenant does your property attract?
Furnished properties are very attractive to short- and mid-term renters such as students and professionals. So, if your property is located close to a university, a furnished property is a good idea.
Students will move in straight from their family homes so are unlikely to bring bulky furniture with them. Professional tenants prefer furnished homes as it saves them money and they can move in quickly.
An unfurnished property is more suitable for families or elderly tenants who rent for the long term and tend to bring their own furniture with them.
Do you have insurance?
If you furnish your rental property, you may want to think about landlord’s insurance to cover any damage that can occur to items within the premises. While this is an additional outgoing, if a large item of furniture needs to be replaced due to breakage or tenant damage, you’ll usually be protected.
Other points to think about when considering furnishing your rental are:
- If tenants are moving large items of furniture in and out, there is a higher risk of damage to your walls/floors
- As a landlord, you are not responsible for insuring tenants’ furnishings
- Tenants in furnished properties can move out easily, so you can get your rental back on the market quickly
- Depending on the location of your rental and the quality of your furnishings, you may be able to command a higher rent
If you want more help and advice as to the best furnishing option for your Ayrshire rental property, give us a call on 01292 442888
Parkview Property Sends a Big Well Done to GB’s Brilliant Paralympians
In this two-minute read, we look at the amazing achievements of our Paralympians.
The word ‘inspirational’ gets thrown around a lot these days, but when it comes to our Paralympic heroes, there really is no other way to describe them.
The grit and determination they displayed in Tokyo provided a much-needed reminder that human beings can do incredible things when they set their minds to it.
We could all learn lessons from this remarkable bunch of people about staying positive, working hard and not quitting. (Useful lessons if you’re moving home, but also for life in general.)
Here are three GB athletes who epitomise the Paralympic spirit.
Micky Yule – From Scotland, stepped on an explosive device while serving with the Royal Engineers in Afghanistan and lost his legs. After undergoing 21 operations to stabilise his injuries, Micky felt ‘good for nothing’ – until he threw his energy into powerlifting.
After years of hard graft, Micky qualified for the Paralympics and this year, won bronze in the men’s 72kg category after lifting a whopping 182kg.
Ellie Robinson – Ellie, who won gold in Rio, finished fifth in Tokyo in the S6 50m butterfly final. In a heartfelt post-race interview (check it out on YouTube, it’ll have you welling up), she explained why the result was ‘a story of triumph, not of defeat’.
In the run-up to the games, medical experts told Ellie to quit swimming due to a worsening hip condition called Perthes disease.
But Ellie pushed through the pain and made it to the final because she wanted to finish her sporting career ‘on her own terms’.
Dame Sarah Storey – The Queen of the Track and the Road, Dame Sarah has won 17 gold medals and is Britain’s most successful Paralympian.
Incredibly, she’s competed at eight Paralympic Games over a 29-year period – and hopes to be a contender in Paris in three years’ time.
The 43-year-old mum-of-two started her career as a swimmer; she won two golds in the pool in Barcelona at the age of 14.
When an ear infection forced her to take time away from swimming, Dame Sarah discovered the joys of cycling – and became a champion on the bike, too.
If you enjoyed the Paralympics, let us know your favourite performance from Tokyo.