Singing Pig

If you have a BTL property that is a long term hold in your portfolio & you want to install Central Heating & Double Glazing, while there is a tenant living in the property paying rent - can you claim the full amount against tax? If the property was:

* In desperate need of the CH & DG works to the point where it was imperitive in order for the property to continue to generate rental income. Could this be classed as a 'Repair'?

* Not in dire need of the works, you are just 'upgrading' the property as you will be holding it for several years & can't be bothered with the property getting in a worse state of disrepair over time.

Just thinking about this in terms of a BTS strategy say where you make £10k after selling a property before tax of 40% (£4k) & costs of 10% (£1k) (for example) = 50% of the profit left, £5k...

But using the £10k to do the relevant repairs on a different BTL property (if they are fully deductable), so £5k to install CH & DG = £5k profit left from the BTS after the remedial works on the BTL. Which you would then leave you with:

£10k (BTS profit) - £5k (BTL repairs) - £1k (selling costs for BTS) = £4k left to be taxed on @ 40% = £1.6k paid in tax as opposed to £4k with the initial BTS.

* Am I thinking along the right lines here?!? Just trying to 'clue myself up a bit more' on accountancy issues. I haven't done any BTS to date, but it makes sense to add BTS to your strategy if the profits from a BTS can be offset against BTL's in your portfolio...

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Or what about, in a seperate scenario, if you remortgaged the property to fund the works & sold the property at a later date - how would this be viewed in terms of CGT?

* Are there any good texts I can read in reference to this subject, with layman language & assuming a very simple knowledge of tax.

Any advice appreciated!

This is just the kind of info that a good property-orientated accountant should be able to tell you. You're basically looking to save tax by re-investing proceeds of a sale into your BTL?

tax on the property business is very complex  - once you get into BTS the IR tend to treat you  as a trader, and different rules apply.  As BTLK says, a good accountant can save you a lot of money. it is essential to talk to him/her Before you do your first BTS  - as it is often the case that buying thru a Ltd is better tax wise for BTS but not necessarily for BTL.

There used to be a booklet called Taxation of Rents  - but it has been re-written - ask your IR for the latest edition - the difference between capital and repair costs are detailed in there -  you can claim repair costs in the year of the repair (replacing like for like)  - but if you improve the property (installing gch where none existed   -  but who is to know whether it did or not ?) then it is my understanding that you cannot claim these costs until you sell the property (*just like you cannot claim legal property purchasing costs until you sell - how much blinking sense is that)

James Smith on here is an excellent property tax accountant.