Does anyone know if the owner or the tenant is responsible for paying council tax, service charge, water rates. Does the letting agent take a percentage of the rent being paid every month? Can these expenses be set against tax liabilities.
My experience is that rent for a complete house or flat doesn't include council tax or water rates, or consumables such as power or metered water. These are paid by the tenant on top of the rent. Unless you want to kindly include them..
And yes the agent takes a percentage (10% to 15% last time I asked, but it depends on the service offered), plus VAT, out of the rent the tenant pays.
For the tax, presumably you pay that on any profit you might make after the agent's fees. Although I don't know whether the cost of owning the property (mortgage etc) is an allowance expense, I have a feeling it might be. I know allowable expenses would be things like repairs and maintenance, but not improvements.
You can probably call any letting agent and ask these basic questions. And the tax office can tell you about allowable expenses on letting.
Don't forget to factor in the cost of having the property empty while looking for, or in-between, tenants (although if you were to take every possibility into account, you would never let any property)
This question came up a month or two ago. I believe the opinion, with respect to mortgages, was that interest is allowable but capital repayment is not.
Are you asking as a tenant or a landlord?
tenants - MSE have a forum for renters and landlords - try landlordzone or somewhere
Unless it's a HMO then the tenants are generally liable for council tax.
Service charge - landlord water rates - tenant
Some letting agents take all the rent and fail to pass it on. Vet them as well as the tenants.
See your accountant for advice on tax issues.
All costs of ownership, and this includes the mortgage interest (not capital repayments), agent's fees, repairs (but not capital improvements), are tax deductible.
Rob Graham
And don't forget insurance.
If they provide a full or partial ongoing management service, then yes, they usually do. But some agents also offer a different kind of service, namely a tenant-find only, and in this case they charge a one-off fee, typically equivalent to about six months' worth of management percentage.
Remember there is a scheme available called the wear and tear allowance. This allows you to deduct 10% from your rental income if it's a fully furnished rental. But obviously if you opt for this then you cannot then also deduct the cost of repairs to or replacements of any items of furniture or contents (basically anything movable, including appliances). But repairs to (and replacement of) fixtures and fittings (lamps, fitted kitchen units, baths etc, and probably fitted carpets too, but not movable rugs) and the building itself (walls, doors, windows) remains deductible.
Actually capital payments and improvement costs are also tax deductible, but not from income, only from gains.
Usually, for a House in Multiple Occupation, the landlord is responsible for all of those costs. For a self contained flat or house, the landlord is responsible for service charges and the tenant is responsible for council tax and water rates. If the property is empty, then the landlord is responsible for all these costs.
The expenses can be deducted from income, and the balance used in calculating your tax liability.
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