A landlord will often manage their property rental business from home, and in doing so will incur additional household expenses, such as additional electricity and gas, additional cleaning costs, etc. As with other expenses, the landlord can claim a deduction for these when working out the profits of the rental business.
Most unincorporated landlords will now prepare accounts on the cash basis.
Wholly and exclusively incurred
The basic rule for an expense to be deductible in computing the profits of a rental business is that the expenses relate wholly and exclusively to that business. This applies equally to a deduction for household expenses – they can be claimed where they relate wholly and exclusively to the rental business.
Where the expenses are wholly and necessarily incurred, a deduction can simply be claimed for the actual expenses. In reality, this will take some working out as household bills will not be split between personal and business expenses. Any reasonable basis of apportionment can be used – such as floor area, number of rooms, hours spent etc. Records should be kept, together with the basis of calculation.
Where a landlord spends more than 25 hours a month managing the business from home, the simplified expenses system can be used to work out the deduction for the additional costs of working from home. The expenses depend on the number of hours worked in the home each month, and the deduction is a flat monthly amount, as shown in the table below.
|Hours of business use per month||Flat rate per month|
|25 to 50 hours||£10|
|51 to 100 hours||£18|
|101 hours or more||£26|
The hours are the total hours worked at the home by anyone in the property rental business.
Nadeem runs his property rental business from home. In 2018/19, he spends 60 hours a month working on the business in all months except August and December, in respect of which he spends 30 hours in each on those months working on the business.
For 2018/19 he is able to claim a deduction of £200 for expenses of running his business from home (10 months @ £18 plus 2 months @ £10).
The simplified expenses rule does not cover telephone and internet, which can be claimed in addition to the deduction for simplified expenses.
Partner note: ITTOIA 2003, Pt. Ch. 5A, Pt. 3
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