Should I be doing my own repairs and improvements?

by Readers Question

14:22 PM, 23rd May 2016
About 2 years ago

Should I be doing my own repairs and improvements?

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Should I be doing my own repairs and improvements?

Over the years I have done a lot of work to my own properties, because I have been involved in the building trade for many years I am reasonably multi-skilled and as such I have done a lot of work on my properties myself.tradesman

Most recently I have improved a property significantly and spent about six months working on it. Whilst this has saved me having to employ others to do the work I obviously have no invoices for the work, other than the materials I have purchased. Also, as a self employed plumber and heating engineer I have not been able to do jobs for others – at least full time, whilst I have been working on my own property.

I imagine I am not on my own in doing this and many other landlords probably do some work themselves – if not out of sheer desperation in finding a reliable, honest and competent trades person.

I am now reflecting whether doing this is the right thing to do. When I come to sell the property I have no invoices for the work I have done so cannot offset that against any CGT liability

Comments from others would be much appreciated.

Chris



Comments

Andy Bell

16:00 PM, 23rd May 2016
About 2 years ago

I think it comes down to: If you had invoiced your self, you should have paid at Lower Rate tax 20% + NI 9% (from zero income) and use up your annual earnings allowance . As capital gains you get an additional annual allowance and have 18% CGT to pay when the gain is realised.

Paying others to do the work depends on your cash flow, differential between your hourly rate and theirs, effect on your tax bracket, speed of getting tenants in.

Also need to factor in how much is legitimate repairs v cap. ex.

For me I usually end up with a mix, paying for unskilled labour, stripping out and skip filling, me for free evening and weekends for everything else apart from boiler fitting and fuse boards.

Mark Crooks

9:21 AM, 24th May 2016
About 2 years ago

It sounds like Andy's comment will provide quite an accurate comparison once all the factors are calculated in.

Looking at it in from a more simplistic view, if we assume you charge the same hourly rate to do your plumbing as the contractors charge to do their work, so you are working to pay them, you would be better off paying them as all those charges are tax deductible. Whereas if you do all the work yourself, you get no tax breaks.

1. You do the work yourself but cannot earn from plumbing so you have no income.
2. You earn from plumbing and pay the contractors, ending up with no income but you do have expenditure invoices.

That does rely on whether you are able to work and earn throughout the project though.

I have also just finished a six month project doing most of the work myself. When working professionally I earn more per hour than a typical contractor, but during this time business was pretty quiet so it made sense for me to do the refurb.

Importantly as well, I loved doing the refurb which is a total change from my normal office job and I got a lot of enjoyment out of it. So I would say the decision isn't just a financial one.

Stan Barlow TEE LTD

13:16 PM, 24th May 2016
About 2 years ago

We have put together a list of competent tradesmen to work with our Landlords and their agents here in Cornwall & Devon. Please contact me at stan@teeltd.co.uk for the list.

In answer to your question about carrying out work it really depends on the level of competence or any statuary qualifications needed.

Rob Crawford

12:47 PM, 25th May 2016
About 2 years ago

It really depends on what else you can do with and how you value your own time. For contractors you can offset the cost of labour against tax. Whereas you can't offset the cost of your own labour in the same way. So if you have the option of paid employment it can be cheaper to use contracted labour. Despite this there are many advantages of doing it yourself. Any excuse to visit a property and develop the tenant relationship is good. Also you get to know your property and will probably tackle other jobs as preventative maintenance at the same time. A contractor will have a more tunnelled vision approach and stick to his/her work brief. If you do it yourself you must be competent and confident and knowledgeable in terms of when you will need a qualified tradesman. I have seen the work of many landlords who think they have done a good job that in reality is of a poor standard. You need also to be aware of H&S and have due diligence and care of tenants who may be occupying the same area where you are working. Where parts are required it can be cheaper especially if you have an agent that applies a mark up.

Nick Pope

9:46 AM, 28th May 2016
About 2 years ago

I do the odd small repair (and don't bother to charge for the time) but otherwise I am better exercising my own skill and employing someone else to do the work on the rental house. I win, he/she wins and it's all tax deductible.

Michael Barnes

23:43 PM, 28th May 2016
About 2 years ago

Don't forget that if you pay others, then that money is not available for investment elsewhere.


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