Do you rent out a commercial property?
Yes? Owning a commercial rental property in the UK can be a profitable venture, especially when you leverage the available tax benefits. Capital Allowances can play a pivotal role in maximising your returns by providing tax relief on certain expenditures. For commercial rental owners, understanding these benefits can lead to substantial savings and improved profitability.
What is a commercial rental property?
The government is mean. It divides rental property into residential and commercial. There is NO Capital Allowances tax relief on residential properties but … H.M.O.s are treated as commercial properties for some types tax relief and, of course, H.M.O.s can include whole blocks of flats and student accommodation as well as the traditional interpretation of a Home of Multiple Occupation. Confused? Give me a call and we can talk it through.
How can I benefit?
Capital Allowances on commercial rental properties can mitigate tax liabilities and improve cash flows in several ways:
Offset taxable income
By claiming Capital Allowances, you can offset the cost of qualifying items against your taxable profits, effectively lowering your corporation/income tax bill.
Refresh and refurbish
If you’re renovating your rental property ahead of a new tenant, Capital Allowances allow you to deduct these costs from your taxable profits, making improvements more financially viable.
Sustain cash flow
With reduced tax obligations, you have better cash flow management, ensuring you have the funds needed for maintenance, marketing, or further property investments.
While the immediate tax relief is beneficial, Capital Allowances also provide long-term gains by gradually reducing taxable income over the years as you continue to claim on qualifying items.
Is there tax relief available?
Absolutely! In the UK, tax relief through Capital Allowances is indeed available for short-term rental property owners on various expenditures.
Plant and Machinery Allowances (PMAs)
You can claim on fixtures within the property, such as furniture, equipment, and certain fittings, under the plant and machinery allowance.
For integral features of a building like heating systems, air conditioning, and electrical systems, you can claim a Writing Down Allowance (WDA) at a set rate per year.
Annual Investment Allowance (AIA)
The AIA allows you to claim up to 100% of the cost in the year of purchase or refurbishment for qualifying items, subject to an annual limit.
Investing in green technology can also offer tax benefits. Enhanced Capital Allowances are available for certain energy-efficient products, allowing you to claim 100% of the cost in the first year.
Chat with us today in a free, no-commitment assessment to ensure you can fully benefit from capital allowances for your commercial rental property.
Get the tax relief you are entitled to
If you need the help of a tax consultant to identify what tax relief you are eligible for on your commercial property, contact us today to have a no obligation chat.