Updating post from Reddit.
Hopefully a simple answer to what is quite a simple question.
When deducting letting agent expenses, should I be included VAT as part of this or not?
E.g. Letting agent charges £90 a month, and VAT is 20% (£18). Should I be using £90 or £108 as the monthly total for letting fees?
TIA!
Do you mean for your tax return or what? If so, the amount you actually pay (with VAT) is the relevant amount.
not my question but thanks for the simple answer, some people answer this so confusing sometimes and talk about " 20% of X is deducted" but in my head its just " total revenue - total spent/allowed to be deductable"
although maybe thats just as a 20% basic tax payer.
Im starting to rent out my first flat in a month of so as an accidental landlord.
Maybe you can answer this, lets say the flat needs/requires a new boiler. My dad words it like " you can get it with 20% off since you can deduct it" can you explain that wording when in my head, the whole thing is deducted of the taxable revenue.
Sorry that may be so confusing. Thanks anyway
i also started as a accidental landlord, now I have 3 houses all paid off and don’t really need to work, this might happen to you as well lol
It's all about what's an allowable deduction for tax purposes.
Let's say you make £500 profit in a particular month. Normally, assuming you're a basic rate tax payer, you'd pay £100 in income tax on that. If you need to spend £200 on maintenance in a month, that can be deducted from your profit, reducing your profit to £300, and 20% tax on that is £60.
Now you've gone from receiving £500, paying £100 in tax, and so netting £400, to receiving £500, paying out £200 in expenses and paying £60 in tax, netting you £240. So, the difference in money in your pocket is £160 despite you spending £200 on maintenance, the difference being £40 which is 20% of the £200 you spent on maintenance.
That's why your dad is saying you get it with "20% off". The saving is the tax that you no longer have to pay.
(Of course, this is all added up over a full tax year, not done monthly, and then submitted as part of your tax return. My recommendation is (1) keep all receipts, and (2) keep a spreadsheet which tracks income and outgoings, and categorieses outgoings according to the various fields that are on a standard tax return. I do this and, at the end of the year, I have all the figures I need to cut and paste ready to go, making completing my tax return a relatively simple process.)
Yes for tax return. Thank you!
Gross amount £108