In the world of accounting, one common question we often encounter from prospective clients is: “What can I claim as an expense?” It’s a fundamental query, and today, we’ll break it down to its essentials.

Understanding Business Expenses

The official definition states that an expense must be “wholly” and “exclusively” a business expense. But let’s face it, this definition can be a bit vague for most people. So, here’s a simple litmus test we recommend applying:

Ask Yourself: “If you didn’t have a business, would you still make this purchase? If the answer is no, it’s likely claimable; if yes, it probably isn’t.”

Now, let’s dive into a specific scenario: property ownership. What expenses can you offset against your rental profits? Let’s clarify some key points.

1. Revenue Expenses vs. Revenue Income

First and foremost, it’s essential to understand that revenue expenses should be matched with revenue income – you can’t offset them against anything else. Now, what expenses can you claim for rental properties? Here are the essentials:

• Insurance Costs: Expenses related to property insurance are typically claimable.
• Rates: Property rates and local taxes are generally deductible.
• Maintenance and Repairs: Costs associated with decorating and repairs are eligible deductions.

2. Mortgage Interest and Tax Credits

It’s crucial to note that mortgage interest isn’t allowable for individuals; it’s reserved for limited companies. For individuals, it’s replaced with a 20% tax credit.

Often Overlooked Expenses

Now, let’s uncover some expenses that people frequently overlook when managing rental properties. These deductions can save you money and improve your tax efficiency:

• Travel Costs: Keep a detailed mileage log for expenses related to property visits.
• Advertisement Costs: Expenses incurred in attracting tenants through advertising are deductible.
• Telephone Costs: Deductible if they are specifically tied to property-related calls and texts.
• Safety Certificates: Expenses for certifications like gas, electric, and energy performance are claimable.
• Advisory Fees: Fees paid to accountants and solicitors for property-related advice can be deducted.
• Subscriptions: Costs for property investment-related magazines, products, and services are eligible deductions.

The Importance of Organisation
The primary reason why these deductible expenses often go unclaimed is due to a lack of organisation. We understand that maintaining meticulous records can be a hassle. That’s why we’re here to help:

• We can provide you with a convenient mileage log template.
• Our industry-leading technology allows you to effortlessly capture receipts with a quick photo.
• Our goal is to ensure you pay no more tax than necessary while playing by the rules set by HMRC. Getting your financial records in order is essential for achieving this goal.

In conclusion, understanding what expenses you can claim is a vital part of optimising your tax situation as a business owner or rental property investor. By staying organised and knowing which deductions apply to your situation, you can maximise your tax savings and keep your finances in top shape. If you have any questions or need assistance, don’t hesitate to reach out to us. Your financial success is our priority.