Read our comprehensive guide to property tax rules and allowable expenses for landlords in the UK in 2026. Our Property Tax Hub experts explain how the rules work and what you can do to reduce your tax liability.
Which expenses can landlords claim against rental income UK 2026?
Landlords in the UK can generally deduct day to day running costs of a rental property, such as repairs, finance costs (subject to the current interest restriction rules), insurance policies, management fees and charges, utilities that they pay, and certain replacement items, as long as the expense is incurred wholly and exclusively for the rental business. Capital costs, including buying the property itself or significantly improving it, do not reduce rental income but may instead reduce a future Capital Gains Tax bill when you sell, so it is crucial to distinguish between revenue expenses that are immediately deductible and capital expenditure that is not.
How do I tell capital from revenue expenses?
Revenue expenses relate to the day to day running and maintenance of the property, such as routine repairs and letting charges, and can usually be offset against rental income in the year they are paid. Capital expenses typically buy or improve an asset – for example an extension, a new kitchen of significantly higher quality, or purchase costs – and are not deductible from rental income, although they may count when working out any taxable gain on sale.
Can I deduct all my mortgage payments?
No, only the interest element (and certain associated finance fees) is treated as a finance cost for tax, and for most individual landlords this now gives a basic rate tax credit rather than a full deduction against rental profits. The capital repayment element of a mortgage is never deductible against rental income because it represents repayment of the loan, not a business expense.
Are repairs deductible against rental income?
Genuine repair and maintenance work to keep the property in its existing condition – such as fixing a broken boiler or repainting walls – is usually deductible, provided it is not an improvement and is not linked to your own private occupation of the property. Work that substantially upgrades or changes the property, or that relates to your own period of residence, is normally treated as capital and not allowable against rents.
What records should landlords keep for tax?
Landlords should keep clear records of all rental income and supporting evidence for every expense, including invoices, receipts, statements and mileage logs. Purchase and improvement costs, together with legal and professional fees on acquisition, should be stored safely as they may be needed many years later to support Capital Gains Tax calculations when the property is eventually sold.
Key Points
- Not all money spent on a rental property is tax deductible – you must separate capital and revenue expenditure.
- Purchase and sale costs, and major improvements, are usually capital and do not reduce rental income, but may reduce future Capital Gains Tax.
- Allowable revenue expenses must be incurred wholly and exclusively for the rental business, and must usually be matched to the correct tax year under the cash basis.
- Mortgage interest for most individual landlords now gives a basic rate tax credit, rather than a full deduction from rental profits.
- Good record keeping is essential to support your claims if HMRC ever asks questions.
Understanding which costs are allowable against rental income is one of the trickier parts of being a property landlord, and the rules have changed significantly in recent years. Misunderstanding the difference between capital and revenue costs, or claiming the wrong type of finance cost, can lead to unexpected tax bills and HMRC enquiries. This guide walks through the main categories of expenditure, offers practical examples, and highlights the traps to avoid so you can keep your rental portfolio compliant and tax efficient.
Understanding allowable costs against rental income
The starting point is the basic rule for property income: to be deductible from your rental income, an expense must be incurred wholly and exclusively for the purposes of your UK property business. In simple terms, that means the cost must be directly related to running and maintaining your letting activity. Within that, HMRC also cares whether the cost is a capital expense, which typically creates or improves an asset, or a revenue expense, which relates to ongoing use and maintenance. Revenue expenses can usually be set against rent in the year of payment, whereas capital expenses usually cannot.
What are the main costs when buying a property in the UK?
Many landlords are surprised to discover that the costs of buying a property are not deductible against rental income. All the usual acquisition costs are treated as part of the capital cost of the property. These typically include:
- Purchase price of the property
- Stamp Duty Land Tax (SDLT) on completion
- Legal fees on purchase
- Building survey fees and valuation costs
- Independent inspection fees
- Auction fees where relevant
Your solicitor’s completion statement will usually summarise most of these items, but you should keep all supporting invoices. While they do not reduce your annual rental profits, they are highly valuable later because they are normally deductible when working out any Capital Gains Tax (CGT) if and when you sell.
What if the purchase falls through?
If a purchase does not complete, the position is less generous. In most cases, costs on a failed acquisition – such as legal fees and survey costs – are not allowable against rental income and cannot be added to CGT base cost because there is no asset acquired. That makes it especially important to commit to due diligence only where a transaction is reasonably likely to proceed.
Allowable finance costs on rental properties
Finance costs are one of the most important – and most misunderstood – categories of rental expenses. Broadly speaking, finance costs include:
- Interest on loans used to buy or improve the rental property
- Arrangement and broker fees on those loans
- Certain bank charges on a dedicated rental business account
If you have a repayment mortgage, only the interest element counts as a finance cost. The capital repayment is simply you paying back the loan, so it is never deductible from rental income.
Residential interest restriction for individuals
For individual landlords with residential properties, the rules changed from April 2020. You no longer deduct interest from rental income to arrive at taxable profit. Instead, you calculate your rental profit before interest, work out the tax on that amount, then receive a basic rate tax credit equal to 20 per cent of your eligible finance costs.
This can be particularly painful for higher and additional rate taxpayers, because although the cash interest might be significant, you only ever receive relief at 20 per cent. In highly geared cases, tax on rental profits before interest can exceed the cash left after paying the mortgage.
Commercial property, furnished holiday lets and companies
The interest restriction does not apply in the same way to:
- Commercial property lettings
- Qualifying furnished holiday lettings
- Properties owned by limited companies
In these cases, finance costs are usually allowed in full as a deduction when computing profits. However, borrowing through a limited company can bring higher interest rates and extra compliance costs, so landlords should weigh up the overall position and seek professional advice before restructuring.
Repairs, maintenance and improvements
Routine repairs and maintenance are normally allowable, provided they are not capital improvements. Examples of revenue repairs include repainting, fixing leaks, replacing broken tiles with similar ones, and repairing a boiler. The key idea is that you are maintaining the property’s existing condition, not upgrading it to a significantly higher standard.
If you lived in the property before letting it, repairs carried out to remedy wear and tear from your own occupation are usually treated as private and not allowable. Only repair work incurred for the purposes of the rental business qualifies. You also cannot normally claim repairs to furnishings under a standard furnished residential letting, although there may be relief under the replacement of domestic items rules, which we cover below.
Remember to include mandatory safety checks that keep the property fit to let, such as gas safety certificates, when totalling your maintenance expenses.
Professional, management and legal fees
Most ongoing professional and management fees related to running your rental business are allowable. Common examples include:
- Letting agent and management fees
- Tenant finder fees
- Legal fees for renewal of short leases (usually under 50 years) and assured shorthold tenancies
- Legal costs of evicting tenants or recovering unpaid rent
- Accountancy fees for preparing rental accounts and tax returns
- Rent collection services and software subscriptions used for the rental business
By contrast, legal fees incurred in buying the property, or for the initial grant of a lease of more than one year, are capital and should be kept for future CGT calculations rather than deducted from annual rent.
Insurance, rent, rates and council tax
Insurance premiums that relate to the rental property can normally be deducted. That typically covers buildings insurance and, where applicable, contents cover for furniture you provide as landlord. Life assurance premiums are not allowable against rental income.
Ground rent on leasehold flats and similar arrangements is usually deductible, as are service charges that relate to the common parts of a building. Council tax is generally the tenant’s responsibility, but if you pay it during void periods, or as part of an arrangement where you are liable, you can usually claim it as an expense. The same applies to business rates if they fall on you as landlord.
Services, utilities and wages
Where you, rather than the tenant, pay for services linked to the letting, those costs can be deductible. That may include electricity for shared hallways, cleaning and maintenance of communal areas, or, in furnished holiday lettings, the utilities and services you provide to guests such as gas, electricity, water, broadband and TV licence.
If you pay someone to provide services such as cleaning or gardening, their wages are normally allowable as long as the work is for the rental business. The employment status of that person matters. If they provide their own tools and work for multiple clients on their own account, they may be genuinely self employed, which is simpler from your perspective. If you employ someone directly, you may need to comply with PAYE, National Insurance, minimum wage rules and other employment regulations. HMRC provides a starter checklist and guidance on running a payroll.
Travel and administration costs
Travel costs are often overlooked. You can claim reasonable travel expenses when you visit your properties for business purposes, for example to carry out inspections, meet contractors or deal with tenant issues. If you use your own car, you can usually use HMRC’s approved mileage rates, which are designed to cover fuel, wear and tear and running costs. Personal journeys that are only loosely linked to the property, such as a holiday during which you briefly check on a nearby rental, will not qualify.
General administration costs are also allowable where they relate to your property business. These might include:
- Postage and stationery
- Phone calls and a reasonable share of mobile costs attributable to rental activity
- Printer ink and office sundries
- Software used to manage rents and compliance
Where you use part of your home as an office to manage your properties, you may be able to claim a modest flat rate or a carefully calculated share of household costs. HMRC provides simplified expenses based on hours worked from home, though for many landlords the amounts are relatively small unless you manage a larger portfolio.
Other allowable expenses and the property income allowance
Other costs incurred wholly and exclusively for the property business can often be deducted. Common examples include licensing fees such as Houses in Multiple Occupation (HMO) licences, safety certificates, and compliance related costs.
Property income allowance
For smaller landlords, the property income allowance can simplify matters. If your gross rental income from unconnected parties is modest, you can choose to deduct a flat £1,000 property allowance instead of actual expenses. This can be helpful if you have few costs, but it is an all or nothing choice for that year: if you claim the allowance, you cannot also deduct individual expenses. You should compare your genuine annual costs with £1,000 and choose whichever gives the better outcome.
Capital expenditure, capital allowances and replacements
Capital expenditure covers the cost of buying or significantly improving a property. Building an extension, converting a loft, or fitting a substantially more expensive kitchen are classic examples of capital costs. These do not reduce your rental profit in the year of spending, but they are usually added to the cost of the property for CGT purposes when you sell. It is essential to keep detailed records and receipts for such work, sometimes over many years.
The boundary between repairs and capital improvements is not always clear. If you buy a run down property at a reduced price and then spend heavily on works that put it into a much better condition, HMRC may treat much of that spend as capital rather than repairs. On the other hand, redecorating or replacing like for like items in a normally maintained property is more likely to be treated as revenue.
Capital allowances
For most standard residential lettings, capital allowances on fixtures and equipment are very restricted. However, for commercial properties and qualifying furnished holiday lets, capital allowances can be claimed on a range of fixtures, plant and machinery such as heating systems, certain electrical systems, and furniture, subject to the usual Annual Investment Allowance limits. Specialist advice is recommended where you have significant spend in these areas, as the rules are detailed and sometimes change.
Replacement of domestic items
In normal residential lettings that are not furnished holiday lets and where rent a room relief is not claimed, you may be able to claim replacement of domestic items relief. This covers the cost of replacing items such as sofas, beds, white goods and other furniture, less any proceeds from selling or scrapping the old item. Relief is only available for genuine like for like or broadly similar replacements. The original cost of domestic items is not deductible when first purchased, only subsequent replacements qualify.
Private use adjustments
Where a property is used partly for private purposes – for example, a holiday home you also let out – you must restrict expenses to the business element only. One common approach is to apportion costs based on days let versus total days available, or on a reasonable and consistent basis that reflects actual use. Similarly, any costs relating to your own period of occupation, such as maintenance done before you first let the property, are generally private and not allowable.
There can be timing nuances. For instance, if you pay an annual insurance premium while still living in the property, but then move out and start letting it part way through the policy year, you may be able to claim the proportion of the premium that relates to the rental period.
Frequently asked questions for landlords
Can I claim expenses from a previous tax year?
Most individual landlords now use the cash basis for property income, meaning you normally claim expenses in the tax year you actually pay them. However, if you incur certain revenue expenses before the rental business formally starts, and they are incurred wholly and exclusively for the property business, they can sometimes be treated as pre trading expenditure and deducted in the first year’s accounts. Once you have started receiving rent, expenses are generally matched to the year of payment under the cash basis.
Do I have to provide receipts for repairs?
There is no requirement to submit receipts with your tax return, but you should always retain evidence for repairs and other expenses in case HMRC asks to see them. Keeping organised records, ideally digitally stored and backed up, will make it much easier to justify your claims, respond to any enquiries and manage your portfolio efficiently.
How much of my mobile phone bill can I claim?
If you have a phone used solely for your rental business, you can usually claim the full cost. Where you use a phone for both personal and business calls, you should make a reasonable and evidence based apportionment and only claim the business proportion. Call logs and usage summaries can help support your calculations if HMRC ever challenges your figures.
Is building a home office tax deductible?
Creating or substantially improving a home office is usually capital expenditure, not a simple revenue expense, and can have wider implications, including for CGT and business rates. In practice, most landlords claim a reasonable proportion of running costs for using a room at home, rather than seeking to deduct structural building works. If you are considering a significant conversion or extension, take tailored professional advice before you start.
Which bills does a tenant usually pay?
The tenancy agreement will set out who pays what, but as a rough guide tenants normally pay rent, council tax, utilities such as gas, electricity and water, TV licence and any broadband or TV packages. As landlord, you typically cover buildings insurance, ground rent and service charges, although some of these costs may be reflected in the rent charged. During void periods you will usually pick up council tax and utilities, and those costs can normally be claimed as expenses.
Bringing it all together
The tax treatment of rental expenses is full of nuances, from the interest restriction regime to the fine line between a repair and an improvement. Getting it wrong can be expensive, especially if HMRC reviews your affairs several years down the line and disallows reliefs you have already claimed. On the other hand, many landlords miss out on perfectly legitimate deductions because they are not aware of them or lack the records to support a claim.
If your rental activity is straightforward and relatively small, a careful read of HMRC’s guidance on property income and a disciplined approach to record keeping may be enough. For more complex portfolios, where you are considering incorporation, furnished holiday lets, significant capital works or disposals, it is usually wise to seek advice from a property tax specialist who can review your position in the round and help you make the most of the reliefs available while staying comfortably on the right side of the rules.
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