Landlord Allowable Expenses UK

Allowable expenses are the costs you can deduct from rental income before working out your tax bill. Get the list right and you pay tax only on genuine profit. Get it wrong, either by missing costs you were entitled to claim or by claiming things HMRC does not allow, and you either overpay or risk a correction with interest attached.

This guide is a practical checklist rather than a legal reference: what counts, what does not, and the evidence you need to back up each claim. The full test HMRC applies is that a cost must be revenue in nature and incurred wholly and exclusively for the rental business, but it is easier to work from examples than from that phrase alone. For how these expenses feed into your actual tax bill, see our companion guide on tax on rental income.

Revenue vs capital

The single most important distinction in landlord tax is between revenue expenses and capital expenses.

Revenue expenses keep the property in its existing condition and are deductible against rental income in the year you incur them. Repainting a wall, fixing a broken boiler, and replacing a worn carpet with a similar one are all revenue costs, because they restore rather than improve the property.

Capital expenses improve the property beyond its condition when you acquired it, or add something that was not there before. An extension, a loft conversion, or replacing a single-glazed window with double glazing where none existed before are capital costs. You cannot deduct these against rental income. Instead, they are added to the cost of the property and can reduce a future Capital Gains Tax bill when you sell, as covered in our capital gains tax on rental property guide.

The line is not always obvious. Replacing a kitchen with a broadly similar kitchen is revenue. Replacing a small kitchen with a larger one by knocking through a wall is capital, at least for the element that goes beyond a like-for-like replacement. When a job mixes both, a careful accountant will often apportion the cost between the two categories rather than treating the whole job as one or the other.

Common allowable items

Costs landlords can typically claim, provided they relate directly to the letting, include:

• Letting agent and management fees, including tenant-find fees and ongoing management commission.
• Landlord insurance, covering buildings, contents you own, and rent guarantee cover if you take it out.
• Repairs and maintenance that restore the property, such as fixing a leak, servicing a boiler, or repairing a fence.
• Ground rent and service charges on leasehold flats.
• Utility bills and council tax for any period you pay them, such as during a void period between tenants.
• Accountancy and professional fees relating to the rental business, including the cost of preparing your tax return.
• Gas safety checks, EICRs and other compliance certificates, since these are a legal requirement of letting the property.
• Advertising costs for finding new tenants.
• Mileage and travel genuinely incurred visiting your rental property for management or inspection purposes, at HMRC's approved mileage rates.
• Legal costs for the day-to-day running of the tenancy, such as evicting a tenant for rent arrears or drawing up a new tenancy agreement.

Mortgage interest sits outside this list. It is not deducted as an expense; instead you receive a 20% tax credit against your final bill under Section 24, which we cover separately in our Section 24 explained guide, because the mechanics are different enough to deserve their own explanation.

Disallowed items

The costs that trip landlords up most often are the ones that look like ordinary running costs but fail the wholly-and-exclusively test, or that are capital rather than revenue in nature:

• The cost of buying the property itself, including Stamp Duty Land Tax, legal fees on purchase, and survey fees. These are capital costs that adjust your base cost for Capital Gains Tax, not an expense against rental income.
• Capital improvements, such as extensions, converting a garage into a habitable room, or adding a conservatory.
• Personal expenses that are not wholly related to the letting, such as clothing for viewings or a general subscription you would have anyway.
• The private element of a mixed-use cost, for example if you use a car partly for the rental business and partly personally, only the business proportion is allowable.
• Fines and penalties, including any civil penalty for a compliance breach.
• Legal costs of acquiring or disposing of the property itself, as opposed to legal costs of running the tenancy day to day.

If you are unsure whether something is disallowed, a useful test is to ask whether the cost would exist if you did not let the property at all. If the answer is no, and it is not a capital cost, it is usually allowable.

A worked example. Say you spend £4,500 on a bathroom in a rental property: £2,800 to replace the existing suite, tiling and flooring on a like-for-like basis, and £1,700 to add an extra shower cubicle where there was previously only a bath. The £2,800 is a revenue repair and is deductible in full against that year's rental income. The £1,700 is a capital improvement, since it adds something new rather than restoring what was there, so it cannot be deducted from rental profit, but it increases the property's base cost for Capital Gains Tax when you eventually sell.

Replacement of domestic items

There is a specific relief for replacing furniture, furnishings, appliances and kitchenware in a let residential property. If you replace an old item, such as a fridge, sofa or washing machine, with a new equivalent for the tenant's continued use, you can deduct the cost of the replacement, less anything you received for the old item (for example, scrap or trade-in value), less any element that represents an improvement rather than a like-for-like swap.

If you upgrade to something noticeably better, for example replacing a basic washing machine with a much larger, more expensive model, only the cost of a reasonable modern equivalent is deductible; the extra cost of the upgrade is treated as capital. This relief only applies to replacements, not to the cost of furnishing a property for the first time, which is a capital cost of setting the property up to let.

Evidence

HMRC does not require you to submit receipts with your tax return, but you must keep records to support every figure for at least five years after the relevant filing deadline, and produce them if asked. For each expense, keep:

• The invoice or receipt showing what was bought, from whom, and when.
• Proof of payment, such as a bank statement or card statement entry.
• A note of which property the cost relates to, if you own more than one.
• For mileage claims, a log of the date, purpose and distance of each journey.

Landlords who log expenses as they happen, ideally against bank transactions as they clear rather than from a shoebox of receipts in January, consistently claim more of what they are entitled to and spend far less time reconstructing the year at tax return time. This matters more, not less, if you fall within Making Tax Digital for landlords, since that regime expects digital records kept as you go rather than a single annual reconstruction.

It is also worth reviewing your expense categories at least once a year rather than only at tax return time. Landlords who add a property, change letting agent, or start paying for a new service midway through the year often forget to check whether the new cost is being captured correctly, and small gaps like this compound across a portfolio far more than they would for a single property.

How Property HQ helps

Property HQ connects to your bank accounts via Open Banking and lets you tag each transaction to a property and expense category as it happens, so your allowable expenses are already organised and evidenced when Self Assessment or a Making Tax Digital update is due, rather than something you have to rebuild from scratch.

Disclaimer

This guide is general information for UK landlords, not legal, tax or mortgage advice. Check GOV.UK, HMRC or a qualified adviser for your situation.