Tax Data

Help & Advice

Capital Gains

Keep details of the cost of the property, expenses of purchase and capital outgoings as you may need this information for CGT purposes when the property is disposed of. If we prepare your rental accounts we track this for you.

On the eventual disposal of your property you will have to consider the capital gain tax (CGT) consequences. This tax will be levied on the difference between the proceeds/market value and your capital costs. It is therefore prudent to keep a contemporaneous record of these capital transactions. If you can let us have the following details, we will include a memorandum on your annual rental accounts.

1. The dates the property was purchased and cost or the date the property was inherited and the probate value.

2. The expenses of acquisition.

3. Particulars of any capital costs (new kitchen. Bathroom, etc).

4. The dates the property was your principle private residence, if applicable.

How interest relief is given in your tax calculation.

For 2017/18 the relief is given partly by deduction, 75%, while the balance of 25% is granted by tax credit. This may cause confusion so an example is given below.

Rental accounts.

Rents receivable                                        20,000

Rates/insurance                                              500

Maintenance                                                 2,000

Interest                                                          6,000

Professional costs                                        1,000

Other expenses                                               500

Total expenses                                            10,000

Net profit                                                   £10,000

On your tax calculation the figure for “Profit from UK land and property” will be increased by 25% of the interest figure – £10,000 plus (£6,000 x 25%) £1,500 = £11,500 and this will form part of your “Total income received” on which tax is calculated. After arriving at a figure for “Income Tax charged” the 25% adjusted for above is then relieved by tax credit at the basic rate band – £1,500 x 20% = £300.

This method of calculation restricts interest relief for higher rate taxpayers.


Replacements Of Domestic Items Relief (RDI).

With effect from 5 April 2016 the old rules on claims for expenditure on expensive items of a long-lasting nature such as household appliances etc. used by their tenants is being replace by “Replacements of Domestic Items Relief” (RDI). All landlords of residential property can claim this (previously the property had to be furnished). The relief is given for the like-for-like replacement cost of domestic items (not the initial cost).  You can also continue to claim tax relief for the repairs and renewal of fixed items.

Domestic items are:

  • Moveable furniture (beds, free-standing wardrobes, etc.).
  • Furnishings (carpets, curtains, linen, etc.).
  • Household appliances (televisions, fridges, freezers, etc.).
  • Kitchenware (crockery, cutlery, etc.)

You cannot claim RDI for expenditure integral to the property that is not normally removed by the landlord when the property is sold but you can claim for repairs.

  • Capital items which becomes part of the house, such as fitted bathroom furniture, baths, toilets, boilers and fitted kitchen units and appliances.
  • New Integral features such as a *boiler or radiator which is part of the heating system (again we can still claim of this type of expenditure against any eventual capital gain when the property is sold, so keep full details). Landlords will continue to receive tax relief for the replacement of these items as repairs.

*There is some debate on whether a new boiler or radiator is capital or is a repair to the overall heating system.

The HMRC notes on this can be found here.