Estate Agent Local - A Directory Of UK Estate Agents

Tips for landlords

Tip 1: Maximize the cost of construction

When depreciating an investment property, the original construction cost must be used.

Many of our clients are now buying properties at dramatically reduced prices – nearer to the original building cost. So the tip is to make the most of the current market conditions and search for properties where the actual construction cost is close to the current purchase price.

Tip 2: Old properties depreciate too
Even properties built before 1980s are worth depreciating. The purchase price of your property includes the Land, Building and Plant and Equipment.

Tip 3: The taller the building the higher the depreciation
Taller buildings attract higher plant and equipment allowances…and the higher the plant and equipment, the higher the depreciation.

Plant and equipment refers to necessary services within the building, as well as items within the property itself. Some of the services required as buildings increase in height are obvious, such as a lift (transport service). Other services are less obvious, with fire hose reels and intercoms all being depreciable under this category.

The other reason tall buildings have a higher ratio of plant and equipment has to do with the amenities the developer provides. For instance, some high-rise buildings have swimming pools, gyms and even mini cinemas.

Keep in mind that a tall building doesn’t necessarily make a better investment. It often means there’ll be higher levies and additional expenses, and you own less land as well. But at the end of the day, it’s up to you to weigh up the pros and cons… and make that final decision!

Tip 4: Small items and Low Value Pooling
A pound today is worth more than a pound tomorrow so deduct items as quickly as possible.

Tip 5: Don’t bother with DIY depreciation
As an expert in the market we are baffled with the number of companies offering a do-it-yourself option. We personally think there are some legal anomalies here, but more importantly – We think you will be missing out on deductions.

Here’s one example. The DIY options in the marketplace give you a tick sheet and ask you to take your own measurements. Now let’s say you measure from one bedroom wall to the other. If you do that all around the house – you would reduce the property by 10% in gross area.

The owners who attempt to estimate their own depreciation, or use non quantity surveying qualified people risk submitting an incomplete or poor depreciation report which “…could not only cost them in missed deductions but could also possibly attract an audit , if their report is not up to the standards required.”

Tip 6: Claiming the residual value write off
We believe millions of pounds will be missed over the coming years in tax depreciation claims due to changes in what can be defined as ‘plant and equipment’.

These included whether the item was absolutely necessary in order to make the property available to be rented out. For instance a kitchen is an absolute necessity – but a microwave wasn’t.

So the moral to the story is…if you are renovating a kitchen or bathroom on a property get a quantity surveyor in before you demolish so they can assess what the residual value of these items are.

That value can still be claimed as an outright deduction and can generate huge savings in the first year.

Tip 7: Furnish your property
Furnishing your property is another way to increase your depreciation deductions as it attracts higher depreciation rates.

In addition to your other depreciation opportunities furniture really can enhance your overall claim.

Tip 8: Use an experienced quantity surveyor
For starters – let’s put this issue in perspective…you have just paid hundreds of thousands of pounds for a property – do you really want to save a couple of hundred tax deductible pounds on the ONLY tax break available to you that can be open to interpretation and skill?

The laws have changed frequently over the years and each building is unique, so it pays to get expert advice. We suggest you engage a firm that has been around for at least 10 years. They will have the necessary experience to analyze your property correctly.

Happy investing.