Can you claim tax relief for costs incurred while the buy-to-let is on the market? - Landlords Financial | Bookkeeping Services Manchester

In light of the erosion of landlords’ rights in the Renters’ Rights Bill, together with a raft of adverse tax changes in recent years, many buy-to-let landlords have come to the decision that it is now time to sell. However, in the current buyer’s market, it may take some time to find a buyer and for the sale to go through. During this period, the landlord may incur costs.

The extent of any tax relief and the way in which it is given will depend on the nature of those costs.

Costs incurred during the period from the end of the last let to the date of completion of the sale may relate to the former lettings business, the sale of the property or neither (such as private costs of the landlord). It is important to identify the true nature of any costs incurred in this period to ascertain whether tax relief is available.

Costs relating to the letting business

The tax legislation allows relief for expenses that are incurred after the letting business has ceased if relief for those costs would have been allowed had the business continued. This may include the cost of heating the property while it was empty, cleaning and gardening costs and council tax paid by the landlord while the property is empty. Likewise, if the landlord repairs or redecorates the property, these costs can also be deducted.

The legislation also makes specific provision for relief for qualifying expenses incurred within seven years of the cessation of the business. This would cover the costs of making good defective work or recovering a bad debt.

Costs relating to the letting are deducted in calculating the profit or loss for the property rental business.

Costs relating to the sale

The landlord will also incur costs in relation to the sale of the property, such as estate agents’ fees and solicitors’ fees. These can be deducted in computing the capital gain or loss on the sale of the property.

Following a period of letting, the property may need updating to secure the best possible price. Any capital costs incurred in improving the property prior to sale can also be deducted in calculating the capital gain or loss on the sale.

Can you claim tax relief for costs incurred while the buy-to-let is on the market? - Landlords Financial | Bookkeeping Services Manchester

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