Owning rental property in the UK is an excellent way to generate income, but it also comes with a set of financial responsibilities. From paying for repairs to managing administrative costs, landlords encounter various expenses throughout the year. Knowing which of these expenses are tax-deductible can significantly reduce your financial burden, ensuring you comply with HMRC regulations while maximising your profits.
In this guide, we’ll explore what qualifies as allowable expenses for UK landlords, the distinction between repairs and improvements, and how to maximise your tax relief while staying within the law.
What Are Allowable Expenses for Landlords?
Allowable expenses are the costs incurred during the day-to-day management and maintenance of your rental property. HMRC defines these as costs that are “wholly and exclusively” for the purpose of letting the property. Essentially, if you wouldn’t have incurred the cost without renting out the property, it’s likely to be an allowable expense.
For example:
- Replacing a broken boiler in a rental property is allowable.
- Installing a more expensive, upgraded heating system that adds value to the property is considered an improvement and is not immediately deductible.
Key Principles of Allowable Expenses
- Wholly and Exclusively for Rental Business: Only costs directly related to letting are claimable.
- No Dual-Purpose Expenses: If an expense has both personal and business elements (e.g., phone bills), only the business portion is deductible.
- Not Capital Expenditure: Costs related to improving the property or acquiring assets are not immediately claimable but can be accounted for when calculating capital gains tax.
20 Tax Expenses You Can Claim as a UK Landlord
1. Mortgage Interest Tax Relief
In the past, landlords could deduct 100% of their mortgage interest from their rental income before calculating their taxable profit. However, the introduction of Section 24 in April 2017 has phased out this benefit.
Now, landlords can no longer directly offset mortgage interest against rental income. Instead, they receive a basic-rate tax credit equivalent to 20% of their mortgage interest costs. This change has particularly affected higher-rate taxpayers, reducing the overall tax efficiency of buy-to-let investments.
Example Calculation:
- Mortgage interest: £6,000
- Tax credit: £6,000 × 20% = £1,200
While this reform may seem restrictive, landlords should still include mortgage interest in their tax returns to claim the available credit. Seeking professional advice on this matter is highly recommended to optimise tax savings.
2. Repairs and Maintenance Costs
Maintaining the condition of your rental property is crucial for tenant satisfaction and legal compliance. HMRC allows landlords to deduct the costs of repairs and maintenance, provided they are not considered improvements.
Repairs vs. Improvements:
- Repairs restore the property to its original state and are deductible (e.g., fixing a leaking roof, repainting walls).
- Improvements enhance the property’s value or functionality and are not immediately deductible (e.g., installing a new conservatory).
Examples of Deductible Repairs:
- Fixing a broken window
- Replacing worn-out carpets
- Repairing faulty plumbing or electrical systems
To ensure compliance, landlords should keep detailed records of repair invoices and receipts.
3. Replacing Windows
If your property’s windows are damaged or worn out, the cost of replacing them can be claimed as an allowable expense. This applies in cases of general wear and tear, vandalism, or accidental damage caused by tenants.
Important Note: The replacement must be like-for-like. For example, if you replace single-glazed windows with double-glazed ones, only the cost equivalent to replacing the original windows is claimable. The additional cost of upgrading to double glazing may be considered an improvement and not immediately deductible.
Keeping detailed documentation, including quotes and receipts, ensures you remain compliant with HMRC guidelines.
4. Property Management Fees
Landlords who use letting agents to manage their properties can claim back the fees charged for their services. These services often include:
- Finding and vetting tenants
- Collecting rent
- Handling maintenance requests
- Conducting property inspections
Letting agents typically charge:
- Tenant-Finder Fee: A one-off fee for finding and setting up a tenancy.
- Management Fee: Ongoing monthly charges, often 10%-20% of the monthly rent.
Claiming these fees as a deductible expense can significantly reduce the financial burden of outsourcing property management tasks.
5. Utility Bills and Council Tax
While tenants are usually responsible for paying utility bills and council tax, landlords may incur these costs under certain circumstances. For example:
- When the property is vacant between tenancies
- If the landlord includes utilities in the rent as part of the tenancy agreement
Claimable Costs:
- Gas, electricity, and water bills
- Council tax for periods when the property is unoccupied
To claim these expenses, landlords must provide accurate records of utility bills and council tax payments for the relevant periods.
6. Landlord Insurance Premiums
Taking out landlord insurance is not only a good practice but also a tax-deductible expense. Unlike standard home insurance, landlord insurance is specifically designed for rental properties and provides coverage for:
- Property damage (e.g., fire, flood, or vandalism)
- Public liability (protection against claims from tenants or visitors)
- Loss of rental income (if the property becomes uninhabitable)
Premiums for these policies can be claimed in full. However, it’s essential to ensure the insurance relates solely to the rental property and not personal use.
Did You Know? Some policies may include coverage for legal fees or rent guarantees, which are also deductible. Be sure to review your policy to maximise your claims.
7. Broken Boiler Repairs
A boiler breakdown is one of the most common and costly issues landlords face. Fortunately, HMRC allows landlords to deduct the cost of repairing or replacing a boiler, provided it’s a like-for-like replacement.
Claimable Costs Include:
- Call-out charges for engineers
- Repair parts and labour
- Replacing an old boiler with a similar model
Important Note: Upgrading to a more expensive or energy-efficient model beyond the standard replacement may be partially classified as an improvement. In such cases, only the equivalent cost of a like-for-like replacement is deductible.
8. Legal and Professional Fees
Legal and professional fees related to managing your rental property are allowable expenses. These costs often include:
- Drafting tenancy agreements
- Handling disputes with tenants
- Eviction proceedings
- Renewing leases of less than 50 years
However, fees related to the initial purchase of the property or long-term leases (more than 50 years) are considered capital expenses and cannot be deducted.
Pro Tip: Even the cost of evicting a problematic tenant to relet the property is claimable. Keep detailed records of all legal fees to ensure compliance.
9. Repointing Brickwork
Over time, the mortar between bricks can deteriorate, leading to structural issues. Repointing brickwork helps restore the property’s integrity and is fully deductible as a maintenance expense.
Claimable Costs Include:
- Labour and materials for repointing
- Equipment hire if you perform the work yourself
- Stone-cleaning services
This expense is particularly relevant for older properties, where frequent upkeep of masonry is necessary to maintain their condition.
10. Advertising and Letting Costs
Finding new tenants often involves advertising the property, whether online, in local newspapers, or through estate agents. These costs are fully allowable as they are directly related to letting the property.
Claimable Advertising Channels:
- Online platforms (e.g., Zoopla, Rightmove)
- Local or national newspapers
- Flyers and printed materials
In addition, landlords can also deduct the costs of tenant-finder services provided by letting agents. Keeping a record of advertising invoices and agent fees ensures you claim the correct amount.
11. Travel Expenses for Landlords
If you use your car, van, or motorbike to manage your rental property, you can claim the costs associated with these journeys. Travel expenses are allowable when they are exclusively for property-related tasks, such as:
- Visiting the property for inspections or repairs
- Meeting with tenants or letting agents
- Purchasing supplies or materials for the property
HMRC-Approved Mileage Rates:
- 45p per mile for the first 10,000 miles
- 25p per mile for additional miles
Alternatively, you can claim the actual cost of fuel, maintenance, and insurance, but you’ll need to apportion these costs between personal and business use. Note that fines for parking or speeding are not deductible.
12. Ground Rents and Service Charges
If you own a leasehold property, you’re likely familiar with ground rents and service charges. These costs are often unavoidable and can significantly impact your bottom line.
Claimable Costs Include:
- Ground rents paid to the freeholder
- Service charges for maintenance of shared areas (e.g., cleaning, landscaping, or repairs to communal spaces)
These expenses are fully allowable, making it essential to keep detailed records of invoices or statements from the freeholder or property management company.
13. Gardening and Cleaning Services
Maintaining the exterior and interior of your rental property is an essential part of property management. The costs of hiring professionals for gardening and cleaning services are fully deductible.
Examples of Claimable Services:
- Regular lawn mowing or landscaping services
- End-of-tenancy cleaning to prepare the property for new tenants
- Professional cleaning of communal areas in multi-tenant properties
These services not only maintain the property’s value but also contribute to tenant satisfaction, making them a wise investment.
14. Treating Damp Issues
Damp problems are a common challenge for landlords, especially in older properties. Whether it’s rising damp, condensation damp, or penetrating damp, the costs of addressing these issues are fully allowable as maintenance expenses.
Claimable Costs Include:
- Repairs to damaged walls, ceilings, or floors
- Installation of ventilation systems to address condensation damp
- Professional fees for damp-proofing specialists
Regular inspections and prompt action can prevent small damp issues from becoming costly repairs, making it crucial to stay vigilant.
15. Redecorating Between Tenancies
To maintain your property’s appeal, redecorating between tenancies is often necessary. HMRC considers redecoration to be a maintenance expense, provided it’s not an improvement.
Examples of Claimable Costs:
- Repainting walls to freshen up the property
- Replacing worn-out carpets or flooring
- Minor repairs, such as fixing holes in walls or replacing broken fittings
Landlords should aim to redecorate at least every five years or between tenancies, depending on the property’s condition. Keep receipts for materials and labour to support your claims.
16. Accountancy Fees
Managing rental property finances can be complex, especially with ever-changing tax regulations. Hiring a professional accountant to handle your tax affairs is not only a smart decision but also a tax-deductible expense.
Claimable Accountancy Services Include:
- Preparing and filing your Self-Assessment tax return
- Advising on allowable expenses and tax reliefs
- Offering guidance on capital gains tax for property sales
While modern apps can assist with expense tracking, accountants can provide personalised advice, ensuring you claim all eligible deductions while staying compliant with HMRC regulations.
17. Subscriptions to Landlord Associations
Joining professional associations such as the National Residential Landlords Association (NRLA) or regional equivalents can provide landlords with valuable resources, legal updates, and networking opportunities.
Benefits of Memberships:
- Access to industry insights and guidance
- Discounts on landlord insurance or services
- Legal advice on tenancy agreements and disputes
Membership fees for these organisations are fully tax-deductible, making them an investment in both your business and peace of mind.
18. Water or Gas Leak Repairs
Emergency repairs for leaks are inevitable for many landlords, especially during colder months when pipes are prone to freezing and bursting. These costs are fully deductible, provided they are necessary to restore the property to a habitable condition.
Examples of Claimable Costs:
- Hiring plumbers to fix burst pipes or gas leaks
- Replacing damaged parts, such as valves or joints
- Repairs to floors or walls affected by leaks
Promptly addressing such issues not only ensures tenant safety but also prevents further damage that could escalate repair costs.
19. Vehicle and Fuel Costs
If you use a vehicle for property-related tasks, such as delivering supplies, attending tenant meetings, or inspecting properties, a proportion of the associated costs is deductible.
Claimable Vehicle Costs Include:
- Fuel expenses or HMRC-approved mileage rates
- Parking costs (excluding fines)
- Maintenance and servicing (if the vehicle is partially used for personal purposes, only the rental-related portion is claimable)
Keeping a mileage log and records of fuel receipts will help you accurately calculate the allowable amount for your tax return.
20. Phone Call Costs
Managing rental properties often involves numerous phone calls with tenants, letting agents, or service providers. The proportion of your phone bill attributable to property-related activities can be claimed as an allowable expense.
Examples:
- Calls to arrange property repairs or maintenance
- Communication with tenants regarding issues or lease agreements
- Conversations with letting agents or solicitors
Landlords should maintain records of calls and estimate the business-related portion of their phone usage. This ensures you only claim the allowable amount and avoid potential disputes with HMRC.
Why Accurate Record-Keeping Matters?
Landlords must maintain detailed records of all their expenses, including receipts, invoices, and bank statements. Although you don’t need to submit these documents with your tax return, HMRC may request them as proof if you’re audited.
- Use apps or software designed for landlords to simplify expense tracking.
- Consider creating separate bank accounts for rental income and expenses for clarity.
What Are the Expenses Not Claimable?
Understanding what you can’t claim is just as important as knowing what you can. Claiming non-allowable expenses can result in penalties from HMRC. Common non-deductible expenses include:
- Property Improvements: Adding an extension or upgrading a kitchen to a high-end design increases the property’s value and is considered a capital expense. These costs cannot be deducted from your rental income but can offset capital gains tax when you sell the property.
- Fines and Penalties: Parking tickets, speeding fines, or penalties from HMRC for late filing are not tax-deductible.
- Personal Costs: Any expenses unrelated to the rental property, such as personal travel or household bills, cannot be claimed.
- Initial Purchase or Setup Costs: Costs associated with acquiring the property (e.g., conveyancing fees or stamp duty) are not deductible from rental income. However, they may be considered when calculating capital gains tax.
By carefully separating personal and property-related expenses, landlords can avoid making errors that could lead to costly fines or audits.
How to Maximising Tax Efficiency as a Landlord?
To reduce your taxable income and optimise your finances as a landlord, it’s crucial to take proactive measures:
- Use Digital Accounting Tools: Modern accounting software or apps specifically designed for landlords can help you track expenses, organise receipts, and ensure compliance. Many platforms integrate with HMRC’s “Making Tax Digital” initiative, simplifying tax returns.
- Engage a Professional Accountant: Although it’s possible to file your tax returns independently, hiring a professional accountant ensures your claims are accurate and complete. Accountants can help identify expenses you might overlook and advise on upcoming changes to tax regulations.
- Stay Updated with Tax Laws: Tax laws governing landlords are subject to frequent updates. For instance, the reduction of mortgage interest tax relief under Section 24 significantly impacted landlords’ ability to claim this expense. By staying informed, you can adapt to changes and plan effectively.
- Keep Thorough Records: Ensure every expense is supported by evidence, such as receipts or invoices. Keeping digital backups can save time and effort during audits.
- Leverage Allowable Expenses Fully: Make a habit of reviewing all potential expenses and claiming every allowable cost. Even small deductions, such as phone call costs or parking expenses, can add up over time.
Conclusion
Managing rental properties in the UK involves a variety of expenses, but with careful planning and a clear understanding of allowable deductions, landlords can optimise their tax returns.
Always remember to maintain accurate records, stay updated with tax regulations, and seek professional guidance when necessary. By leveraging allowable expenses, you can reduce your taxable income and maximise your property’s profitability.
FAQs About Landlord Expenses in the UK
Can I claim expenses if my property is vacant?
Yes, landlords can claim specific costs during vacant periods, such as council tax, utility bills, and landlord insurance premiums, provided the property is genuinely available for rent.
What’s the difference between repairs and improvements?
Repairs restore the property to its original condition (e.g., fixing a broken window), while improvements enhance its value or functionality (e.g., installing a modern double-glazed window). Only repairs are deductible from rental income.
Are accountancy fees tax-deductible?
Yes, the cost of hiring an accountant to manage your rental property’s financial affairs or file your Self-Assessment tax return is fully claimable.
Can I claim for mileage on my car?
Yes, you can claim travel expenses incurred for property-related activities, such as attending tenant viewings or meeting with agents. The HMRC-approved mileage rate is 45p per mile for the first 10,000 miles and 25p per mile thereafter.
Are there limits to travel expense claims?
Travel expenses must be directly related to rental activities. Claims for private journeys, even partially related to your rental property, are not permitted.
Can landlords claim expenses for furnished properties?
Yes, landlords can claim costs for maintaining or replacing furnishings through the Replacement of Domestic Items Relief. However, the expense must be for like-for-like replacements.
What is the penalty for incorrectly claiming expenses?
HMRC may impose fines, interest, or other penalties if you submit incorrect tax returns. Deliberate or negligent errors could result in significant fines.
