Landlord allowable expenses: what you can and cannot claim

If you let out property in the UK, your tax is worked out on your rental profit: rent received minus allowable expenses. Every cost you can legitimately claim lowers that profit, and every claim needs a receipt behind it. This guide works through HMRC's list of allowable expenses, the grey areas that cause most of the arguments, and how to keep your paperwork tidy, which matters more now that landlords are joining Making Tax Digital.

The basic test: wholly and exclusively

HMRC's guidance on working out your rental income says you can deduct expenses as long as they are wholly and exclusively for the purposes of renting out the property. A cost that is partly personal, such as your own phone, has to be split so only the rental share is claimed.

Expenses HMRC lists as allowable

If you pay for them yourself, HMRC lists these as deductible:

general maintenance and repairs to the property
water rates, council tax, gas and electricity
insurance, such as landlords' policies for buildings, contents and public liability
costs of services, including the wages of gardeners and cleaners
letting agent fees and management fees
legal fees for lets of a year or less, or for renewing a lease for less than 50 years
accountant's fees
rents (if you sub-let), ground rents and service charges
direct costs such as phone calls, stationery and advertising for new tenants
vehicle running costs, but only the proportion used for your rental business, including mileage rate deductions

Most landlords will recognise their own costs on that list. The skill is in the boundaries.

Repairs versus improvements

This is the most common area of dispute. Repairs are allowable; improvements are capital spending and are not.

HMRC describes a repair as something that restores an asset to its original condition, sometimes by replacing parts of it. Its examples include replacing roof tiles blown off by a storm, replacing a broken-down boiler, and redecorating between tenants to restore the property to its original condition.

Replacing something with the nearest modern equivalent is still a repair if the improvement is incidental, and HMRC gives the example of replacing a single-glazed window with a double-glazed one. Renewing fixtures such as baths, washbasins or toilets is normally allowable too, as long as it is like-for-like rather than an upgrade.

Capital spending, on the other hand, includes adding something that was not there before, or altering, improving or upgrading something that was. HMRC's examples include building an extension and installing a security system where there was not one before.

Capital costs cannot be set against rental income, but keep the receipts anyway. HMRC notes you may be able to set them against Capital Gains Tax when you sell. A kitchen extension in 2026 may matter in a sale many years later, long after the normal record-keeping period would have ended.

Insurance pay-outs and deposits

If insurance covers some of a repair, you can only claim the part the pay-out did not cover. The same applies if you keep some of a tenant's deposit to put right damage: you can only claim repair costs above the amount you kept.

Replacing furniture and appliances

You cannot claim the cost of furnishing a property for the first time. When you replace an item, though, you may be able to claim replacement of domestic items relief. It covers things such as beds and free-standing wardrobes, curtains, carpets and floor coverings, televisions, fridges and freezers, and crockery and cutlery. It applies to unfurnished, part-furnished and fully furnished lets, but not if you rent out a room in your own home.

The relief is for the cost of a like-for-like replacement plus incidental costs such as disposal, minus anything you got for the old item. If the new item is an upgrade, you claim only what an equivalent would have cost. HMRC's example is a sofa replaced with a sofa bed: if a sofa costs £400 and the sofa bed £550, only £400 is deductible. A more energy-efficient fridge counts as a reasonable modern equivalent, so its full cost is eligible.

Small items with a short life that need replacing almost every year, such as cushions or bed linen, are allowable in the normal way.

Mortgage interest and finance costs

For residential lets, mortgage interest is not deducted like other expenses. Since 6 April 2020, Income Tax relief on residential finance costs has been restricted to the basic rate. Instead of reducing your profit, the interest gives you a tax reduction worked out at the basic rate. The restriction covers interest on mortgages, loans (including loans to buy furnishings) and overdrafts, plus fees for arranging or repaying them.

Two points catch people out:

Only the interest counts. The capital part of a repayment mortgage is never deductible.
Interest on borrowing above the property's value when it first came into the letting business is not deductible at all.

Keep your annual mortgage statements, because they show the interest split that you or your accountant will need.

The £1,000 property allowance

If your rental income is small, you can claim the property allowance instead of expenses and receive up to £1,000 a year of property income tax-free. You cannot do both: claiming the allowance means you cannot deduct your actual expenses. It suits someone letting a driveway, but rarely a landlord with a mortgage, insurance and repairs.

Making Tax Digital for landlords

Landlords are within Making Tax Digital for Income Tax. If your qualifying income, meaning gross rent plus any self-employment income, is over £50,000 you should have started on 6 April 2026. Over £30,000 starts on 6 April 2027, and over £20,000 on 6 April 2028. You will need a digital record of each income and expense item, with its amount, date and category, and quarterly updates to HMRC.

Receipts worth keeping for every property

tradesperson invoices for each repair, with the address and a description of the work
letting agent statements showing rent collected and fees deducted
insurance schedules and renewal notices
utility, council tax and service charge bills you paid
receipts for replacement furniture and appliances, and anything received for the old item
annual mortgage interest statements
receipts for capital work, kept until well after you sell

Keep them for at least five years after the 31 January filing deadline for the tax year, as explained in how long to keep receipts, and longer for capital items.

If you have more than one property, tag each receipt with the property when you capture it. In Receipts Keeper you can photograph a contractor's invoice on site, let it read the supplier, date, total and VAT, add a tag for the property and export the lot as a CSV for your accountant or bookkeeping software at the end of each quarter.

Sources

This article is general information, not tax advice. Property tax rules have many exceptions, so check your own situation with HMRC or an accountant.