Landlord allowable expenses — what you can actually claim
You can deduct an expense from rental income if it's wholly and exclusively for the purpose of letting the property. Most of the categories below are straightforward; the two places landlords consistently get caught out are the capital vs. repair line and the fact that mortgage interest hasn't been a normal deduction since 2020.
Allowable expenses
- General maintenance and repairs to the property
- Water rates, council tax, gas and electricity — if you pay them, not the tenant
- Landlord insurance — buildings, contents and public liability
- Costs of services you pay for, including gardeners and cleaners
- Letting agent fees and management fees
- Legal fees for lets of a year or less, or renewing a lease under 50 years
- Accountant's fees
- Ground rents and service charges (and rent, if you're sub-letting)
- Direct costs: phone calls, stationery, advertising for new tenants
- Vehicle running costs — only the business-use proportion
What you cannot claim
- Capital improvements to the property (extensions, upgrades, adding something new)
- The capital element of mortgage repayments — only the interest, and even that isn't a normal deduction any more
- Private phone calls unrelated to the letting business
- Clothing bought for a meeting about the property — even a suit
- Any personal expense not incurred solely for the rental business
Repairs vs. capital improvements
This is the distinction that matters most, because it decides whether an expense is deductible at all. A repair restores the property to its original condition — replacing a broken boiler, fixing storm damage, redecorating between tenants — and is allowable. An improvement makes the property better than it was, like adding an extension or installing a security system that wasn't there before, and is capital expenditure: not deductible against rental income, though it may reduce Capital Gains Tax if you sell later.
A like-for-like replacement using a modern equivalent still counts as a repair, not an improvement — HMRC's own example is swapping a single-glazed window for a double-glazed one. The line gets harder to draw with a full renovation: work done to bring a run-down property up to a fit state for its first letting is treated as capital expenditure even if the individual jobs look like maintenance.
Replacement of domestic items relief
You cannot deduct the cost of furnishing a property for the first time — buying the original sofa, fridge or curtains is capital expenditure. But once that item needs replacing, the cost of the replacement is deductible, covering movable furniture, furnishings, household appliances and kitchenware.
If the new item is genuinely equivalent, you claim the full cost. If it's an upgrade, you can only claim what an equivalent item would have cost — HMRC's own worked example is replacing a £400 sofa with a £550 sofa bed: you can claim £400, and no relief at all is available on the extra £150. A more efficient replacement of the same type of item, like a fridge with a better energy rating, isn't treated as an upgrade and the full cost is claimable. The relief doesn't apply if you're letting a room in your own home.
The £1,000 property allowance
Instead of totting up real expenses, you can deduct a flat £1,000 from your rental income with no receipts required. The rule that makes this a genuine either/or decision: claim the property allowance and you cannot also deduct any of your real expenses, even if they add up to more. For most landlords with a mortgage, insurance and any ongoing maintenance, real expenses comfortably exceed £1,000 a year, so the allowance mainly suits a very lightly-run let with minimal costs.
Mortgage interest — the one that changed in 2020
Since 6 April 2020, mortgage interest and other finance costs are no longer deducted from rental income before working out your taxable profit. You're taxed on the full rent, then given a flat 20% basic-rate tax credit on the finance cost instead — worse than a full deduction for anyone paying tax above the basic rate. The mechanics and the worked numbers are covered in full on the Section 24 guide.
Disclaimer: This guide is general information, not tax advice. Allowable-expense rules can change in future Budgets and HMRC guidance. Confirm the current position with HMRC or your accountant before relying on it for your own tax return.
If you're filing quarterly under Making Tax Digital, these are the same income and expense categories your software will ask for — see the MTD ITSA guide for who's in scope and the quarterly deadline calendar for exactly when to file.
FAQ
Can I still deduct my mortgage interest as an expense?
No, not since 6 April 2020. Mortgage interest and other finance costs are no longer deducted from rental income before you calculate your tax — instead you pay tax on the full rent and then get a 20% basic-rate tax credit on the finance cost. That's a materially worse deal for higher-rate taxpayers than the old system, and it's a big enough topic that we cover it separately: see the full breakdown on the Section 24 guide.
What's the difference between a repair and an improvement?
A repair restores something to its original condition — replacing storm-damaged roof tiles, fixing a broken boiler, redecorating between tenants — and is allowable. An improvement adds something better than what was there, like replacing a kitchen with a higher-specification one, and is capital expenditure, which isn't deductible against rental income. The grey area is a like-for-like replacement using a modern equivalent — HMRC's own example is swapping a single-glazed window for a double-glazed one, which still counts as a repair because the improvement is incidental rather than the point of the work.
What is replacement of domestic items relief?
It lets you deduct the cost of replacing furniture, furnishings, appliances and kitchenware in a let property — the cost of the FIRST purchase of these items isn't deductible, only replacements are. If the new item is genuinely equivalent to the old one, you can claim the full cost. If it's an upgrade — HMRC's example is replacing a sofa with a sofa bed — you can only claim the cost of an equivalent sofa, not the sofa bed's higher price. It doesn't apply if you're renting a room in your own home.
What is the £1,000 property allowance, and should I use it?
It lets you deduct a flat £1,000 from your rental income instead of claiming your actual expenses, with no need to keep receipts. The catch is it's all or nothing — if you claim the property allowance you cannot also deduct any of your real expenses, even a bigger figure. It only makes sense if your genuine allowable expenses are under £1,000 a year, which is unusual for anyone with a mortgaged or actively maintained property, and it isn't available at all if you also claim rent-a-room relief on the same income.
Can I claim expenses for a property I haven't let out yet?
Generally no, if the work is what's making the property fit to let in the first place. HMRC treats work carried out on a run-down or derelict property before its first letting as capital expenditure rather than repairs, even if the individual jobs look like maintenance — the test is whether the property was in a fit state for rental when you bought it. Costs incurred after a property is already let and just needs routine upkeep are treated differently.
What happens if my expenses are more than my rental income?
You make a loss for tax purposes, and you can normally only set that loss against future profits from the same property rental business — not against your other income, like your salary. If you own more than one UK property, they're all treated as one business, so a loss on one address is automatically offset against profit on another in the same year before you decide whether there's an overall loss to carry forward.
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