Can Council Tax be claimed as an expense?

Hi Peter,

I had to look it up but it appears you can claim Council Tax as an expense from the .Gov web page >> https://www.gov.uk/renting-out-a-property/paying-tax

However I am not an accountant and don't know all your circumstances so please do not act upon my advice.

Costs you can claim to reduce tax

There are different tax rules for:

residential properties
furnished holiday lettings
commercial properties

Residential properties

You or your company must pay tax on the profit you make from renting out the property, after deductions for ‘allowable expenses’.

Allowable expenses are things you need to spend money on in the day-to-day running of the property, like:

letting agents’ fees
legal fees for lets of a year or less, or for renewing a lease for less than 50 years
accountants’ fees
buildings and contents insurance
interest on property loans
maintenance and repairs to the property (but not improvements)
utility bills, like gas, water and electricity
rent, ground rent, service charges
Council Tax
services you pay for, like cleaning or gardening
other direct costs of letting the property, like phone calls, stationery and advertising

Allowable expenses don’t include ‘capital expenditure’ - like buying a property or renovating it beyond repairs for wear and tear.

Please also see out Tax Planning tab above >> https://www.property118.com/tax/

Yes, Council Tax is an allowable expenses against portfolio income.

Council Tax is not a Capital Expense and as such is NOT attached to a particular property and therefore is NOT only tax deductible on income received from a specific property.

Non-Capital Expenses are offset against gross income as a whole in the relevant tax year.

Only Capital Expenses are attached to the property as they are offset against the capital gain on the sale of the property and not your annual income. These are direct expenses incurred in the purchase of the property or the cost of improvements (over and above normal repairs).

That is my understanding as a long-term BTL owner (not an accountant).

Whilst the above is correct for an on-going business, have a recollection that once having placed the property on the market for sale it may be considered no longer part of your letting portfolio and as such expenses incurred after this date (placing on market for sale) may strictly not be allowed. Which is odd as expenses prior to first let are allowed. No doubt there will be varying interpretations on this so will be interesting to read the views of others.

Reply to the comment left by "Jireh Homes" at "12/07/2016 - 09:06":

Yet they are happy to count rent earned from the property as income after it's placed on the market...

I think you are referring to a property which is untenanted and not on the market for let due to being marketed for sale. If the property is not being used as an income producing property then its revenue expenses are technically not deductible.

This would only really apply if your intention in selling the property is to end your property business. If your business is ongoing via either your other existing rental properties, or you intend to replace the sold property with another BTL, and do so within a 3 year period then HMRC would I believe, consider your business to be ongoing and therefore the expenses to be deductible.

Also, in the event that the property is only empty in the normal course of void periods (you haven't given notice to a sitting tenant for the purposes of selling) and you have the property marketed to Let (you may be selling as a BTL), then I'm sure you can still claim your expenses up until sale, as the property is still intended to be income producing up until transfer, regardless of any other properties being owned, or your future purchase intentions.