What is a capital expense?

A capital expense on a property is a cost incurred to acquire, improve or extend the life of a property.

These are not regular operating costs but instead seen as investments in the property that provide long term value.

Capital expenses are not immediately tax deductible.

Therefore for any NRL (non resident landlords) when a capital expense is added the expense is not deductible from income.

Example below:

Rental income of £1,000

Capital expense charge £200

Landlord payment £800

Payment of NRL £200

The NRL amount is calculated at a standard 20% from the £1,000 not from the £800 because the £200 capital expense charge cannot be deducted from income before NRL calculation.

How to Create a Capital expense?

To create a capital expense you can create a charge in Lettspay by following the steps here, then before adding the charge you can tick the tick box “capital expense.”