Allowable Expenses for Landlords: What You Can Claim

Typical allowable expenses

Letting and management fees, buildings and landlord insurance, repairs to restore a property, safety certificates, council tax and utilities paid by you, advertising for tenants and professional fees.

Repairs versus improvements

Fixing a broken boiler is a repair. Replacing a kitchen with a better one or adding an extension is an improvement, which is not deductible against income but may reduce capital gains later.

Finance costs

Mortgage interest is not deducted as an expense. Instead you receive a tax reduction equal to 20% of the interest, under the Section 24 rules.

Property allowance alternative

You can claim the £1,000 allowance instead of actual costs, which suits landlords with very low expenses.

The test for an allowable landlord expense

As a general rule, a cost is allowable if it is incurred wholly and exclusively for the purpose of letting the property and is revenue in nature, meaning it keeps the property in its current condition rather than improving it. Costs that give you a long-term asset, such as an extension, are capital and are not deducted from rental income, although they may reduce a capital gain when you sell. Where a cost is partly personal, only the business part can be claimed.

Costs landlords commonly claim

• Letting agent fees and tenant-finding fees, plus the VAT if you cannot recover it.
• Landlord insurance, including buildings, contents and rent guarantee cover.
• Repairs and maintenance that restore something to its previous state.
• Gas safety certificates, electrical safety checks and similar compliance costs.
• Accountancy fees for the rental part of your affairs.
• Council tax, utilities and service charges you pay while the property is empty or let inclusive of bills.
• Ground rent and, for leasehold properties, service charges.

Mortgage interest is treated differently

Interest on a residential buy-to-let loan is not deducted from rental profit for individual landlords. Instead you receive a basic rate tax reduction of 20% of the interest, subject to limits. Check current HMRC guidance for how the restriction applies to your income.

Worked example: a single buy-to-let

This is an illustrative example. A landlord receives £14,400 in rent over the year (£1,200 a month) and pays the following.

Using the £1,000 property allowance instead would give a profit of £14,400 − £1,000 = £13,400, so claiming the actual expenses is better here. If the landlord also paid £4,000 of mortgage interest, it is not part of the £3,278, but a 20% reduction of £4,000 × 20% = £800 may come off the tax bill, subject to limits. Our guide on the property allowance versus expenses shows how to compare the two.

Repairs, improvements and replacing items

Fixing a leaking roof is usually a repair. Replacing the whole roof with a different, better type of covering may be an improvement. The line is not always clear, so keep invoices that describe the work. For furnished lets, relief is available for replacing domestic items such as a sofa or fridge, but not for the first purchase of items. We cover the detail in repairs versus improvements and in expenses landlords often forget.

Common mistakes landlords make

• Deducting mortgage capital repayments or the full mortgage interest as an expense.
• Treating improvements, such as a new extension or a luxury kitchen, as repairs.
• Claiming personal costs or the cost of the landlord’s own home.
• Mixing joint-owner expenses without recording each person’s share.
• Losing receipts and relying on bank statements alone.
• Combining property allowance and actual expenses on the same income, which is not permitted.

A short checklist for rental records

1. Keep a spreadsheet of rent received by month and tenant.
2. Save every invoice, labelling it as repair, improvement or running cost.
3. Record agent statements, which often show fees and VAT.
4. Note each year’s mortgage interest from your lender’s annual statement.
5. Follow our first landlord tax return checklist before filing.

Our Self Assessment for landlords service covers the rental pages of the return. SATR offers a fixed fee from £199 + VAT, with qualified UK accountants filing online.

This is general information, not personal tax advice.

Special situations worth knowing about

Jointly owned properties

If you own a rental property with someone else, each owner reports their own share of the rent and expenses. Spouses and civil partners who own property jointly are normally treated as sharing profits equally, unless they hold the property in unequal shares and make the right declaration to HMRC. Check current HMRC guidance before relying on an unequal split.

Empty periods and costs before the first tenant

Running costs while a property is genuinely being marketed for rent, such as utilities, council tax and insurance, are usually allowable. Costs that were incurred to bring a property up to a lettable standard for the first time can be more difficult, because they may be treated as capital. Keep detailed invoices and ask for advice where the work was substantial.

Cash basis and accruals

Many smaller landlords now use the cash basis by default, which means you record income when received and expenses when paid. Larger landlords, or those who choose otherwise, may use traditional accounting, where income and costs are matched to the period they relate to. Check current HMRC guidance to see which applies to you.

Travel and visits

Travel to inspect or maintain a rental property can be claimed where it is for the business. Mileage can be claimed at 45p a mile for the first 10,000 miles and 25p after that if you use your own car and do not claim actual running costs. Keep a log with dates, journey purpose and mileage.

Frequently asked questions

Can I claim travel to my rental property?

Yes, reasonable travel costs for property management can be claimed, but not commuting-type journeys unrelated to the let.

Can I claim the cost of furnishing?

Furniture replacement can be claimed via the replacement of domestic items relief where available.

Can I claim the cost of furnishing a rental property?

Not for the first purchase of furniture for a furnished let, but relief may be available when you replace domestic items. Check current HMRC guidance for the detail.

Can I deduct mortgage interest from rental income?

Not directly. Individual landlords receive a basic rate tax reduction of 20% of the interest, subject to limits.

Do I have to keep receipts for landlord expenses?

Yes. Keep evidence of income and expenses for at least five years after the 31 January submission deadline.

Conclusion

Landlords can deduct costs that are wholly and exclusively for letting, from agent fees and insurance to repairs and professional fees. The £1,000 property allowance offers a simpler alternative if your expenses are low, while mortgage interest gets a 20% tax reduction under Section 24 rather than a direct deduction. Keep full records for at least five years.

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