Can You Claim Expenses from Before You Begin to Receive Rent?

As a prospective landlord or one looking to grow your portfolio, you might wonder if you are able to claim expenses incurred before you start receiving rental income. The good news is that HMRC does allow certain pre-letting expenses to be deducted, provided they meet specific criteria. Pre-letting expenses are costs incurred before the start of the rental business, and HMRC defines the start of a rental business as the date when the first property is let out. Any activities before this would not be considered a part of the rental business.

However, some pre-letting expenses are allowable, and these can date as far back as seven years prior to the start of the rental business, as long as they meet the following criteria:

• Wholly and Exclusively for the Rental Business – The expenses must be solely for the purpose of letting the property. For example, costs relating to preparing the property for letting would, in most cases, be allowable.
• Revenue Expenses – These are day-to-day running costs, such as repairs and maintenance, and are generally allowable. In contrast, capital expenses, such as an extension or a major improvement to the property, would not be deductible as revenue expenses.
• Deductible if Incurred During the Rental Business – This means that if an expense would be deductible against rental income after letting has commenced, it is likely to be allowable as a pre-letting expense.

Examples of Allowable Pre-Letting Expenses

• Repairing or maintaining the property (e.g., fixing leaks, repainting, or replacing broken fixtures)
• Legal and professional fees related to preparing tenancy agreements
• Advertising costs to attract tenants
• Council tax and utility bills paid while the property was vacant
• Mortgage interest (if applicable)

Understanding the rules around pre-letting expenses can help you maximise your tax relief and ensure compliance with HMRC regulations. By claiming allowable expenses, you can reduce your tax liability and improve the profitability of your rental business. If you need further guidance on how to optimise your tax position, consulting with a qualified accountant can be beneficial.

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