Repairs to residential rental properties are tax deductible (conditions apply) and will reduce your overall income for tax (including salary, business income, etc) for your income received up to 31/3/2019.
A tax law change will soon take effect and this means that expenses incurred from 1/4/2019 onward will not be able to reduce your “OTHER” income (from salary or your business), but will need to be carried forward and can only be claimed against future RENTAL income. This advice is written for tax payers with a 31/3/2019 tax year end.
This new restriction is called “ring fencing”.
Therefore, we advise that if you are considering doing repairs, and if you are likely to have a rental loss, that it will probably be advantageous to carry out and claim these repairs before 31/3/2019 so that they can be claimed in this tax year.
We also recommend discussing any planned repairs with us directly because there can be exceptions, and we want to ensure the best outcome for all our clients.
Please not that the related tax claim only applies where individuals, partnerships and most “Look Through Companies” own a residential rental property.
The ring-fencing rules do not affect residential properties that are owned by Trusts, companies that are not Look Through Companies, and properties that are “Mixed Use Assets”.
By way of further explanation:
“Look Through Companies” allocate their losses for use in their shareholders tax returns versus non Look Through Companies retain their tax losses.
“Mixed Use Assets” (MUA) are assets (eg a beach house) that are used partly for private use and partly to earn rental income. Accordingly MUA expenses need to be apportioned between non tax deductible (private use) versus tax deductible.