Creating a reserve for landlord expenses? - USERNAME: Rodderstax - 19/07/2022

Tax Question

In July 2022 i spent over £30000 repairing and painting a rental property that has been rented for several years. This years tax return will be up to 5 April 2022 and will be expensive in tax terms as no significant tax deductible expenses.

Question:
Is there any way that i can add a reserve for expenses incurred in July in the april 2022tax return.

Answer:

The default rule is that landlords with rental income of less than £150,000 per year are taxed on the cash basis. As such, you would only include receipts received and expenses paid during the tax year. 

It is possible to make an election for the cash basis not to apply. You'd then use standard accountancy rules to calculate the income and expenses for the year.

This means that you deduct any allowable expenses which relate to work done for the rental business, or goods and services supplied to the rental business, for a particular tax year to 5 April.

It wouldn't so much be a reserve, but the general application of the accruals basis of accounting. You'd then need to determine to what extent (if at all), the expenses related to work done for the rental business for the April 2022 tax return.