Tax Relief On Legal Fees During Purchases

17/08/2021 by David M Slater

When you purchase a property, a number of expenses that are associated with the purchase are treated as capital expenses. This would include legal fees for conveyancing. This means that you will not be able to get tax relief until a later date when you come to sell the property.

There is a tip that I will share with you as to how you can get some tax relief for these legal costs against rental profits so that you can benefit in the short term

Your conveyancer has two roles when you employ them. Firstly they are employed to act on your behalf in order to purchase the property. Their second role is that they are (usually) also instructed by you to act on behalf of the mortgage lender in order to arrange finance. Importantly finance costs are not capital expenses.

When you instruct a solicitor and are quoted for their legal fees, ask them to apportion their bill based on firstly acting for you as part of the purchase and secondly for acting on behalf of the lender to arrange finance. The latter can be treated as a revenue expense meaning you can get tax relief against rental profits. The picture carousel below shows an example of a purchase I made back in 2015 where I used this trick.

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Note that relief on finance costs are restricted for those who invest in their own name. The amounts involved are not huge, but this relief could quickly add up over the course of your investing career.

Some solicitors may get a bit confused by this as they may not have been requested to do this before. Ideally find a good one who gets it and keep using them.

Remember to implement this tip on each new purchase.