Understanding which expenses you can claim against your rental income is essential for calculating your accurate tax liability. HMRC has clear rules about what qualifies and getting them right helps you stay compliant. This guide explains what you can claim, what you cannot, and how to meet your obligations.
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What are allowable expenses for landlords
An allowable expense is any cost incurred wholly and exclusively for the business of renting out your property. If the expense exists only because you’re a landlord, it’s likely allowable. If it’s something you’d pay anyway whether you rented or not, it probably isn’t.
The key phrase is “wholly and exclusively.” The cost must be entirely for the rental business, not split between personal and business use. HMRC applies this test strictly.
Which landlord expenses can be claimed against rental income
Common allowable expenses include letting agent fees, accountancy costs, building and contents insurance, repairs and maintenance, council tax if you pay it, utilities if you’re responsible, professional legal fees related to the letting, and travel costs for property journeys.
You can also claim ground rent and service charges on leasehold properties, advertising costs for finding tenants, bank charges, and property management fees.
For furnished properties, replacement of domestic items is allowable. This covers replacing furniture, appliances, carpets, curtains, and similar items when they reach the end of their life. The replacement must be broadly equivalent to the original; you cannot claim upgrades. Crucially, this relief only applies to replacement items, not the initial cost of furnishing the property when you first let it.
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Repairs vs improvements: Understanding the critical difference
This distinction trips up more landlords than any other. HMRC draws a clear line.
A repair restores a property to its original condition. Fixing a leaky roof, repainting, replacing a broken window, repairing plumbing, or servicing a boiler are all repairs and fully allowable. When the improvement is incidental to the repair, such as replacing a single-glazed window with a double-glazed one, it still counts as a repair.
An improvement adds value or changes the property’s character. Building an extension, adding a conservatory, upgrading a kitchen, or converting a loft are improvements. These are capital expenditure and cannot be deducted from rental income, though they may reduce capital gains tax when you sell.
When unsure, speak with your accountant before incurring the expense.
Expenses landlords cannot usually claim
Capital expenditure cannot be deducted, including buying the property, structural improvements, and initial furnishings when first letting a property. (An exception is replacement of domestic items in furnished properties, which can be claimed.) Personal expenses unrelated to the business cannot be claimed. Mortgage capital repayment is not allowable (though mortgage interest qualifies for relief under Section 24). Fines and penalties cannot be claimed. Your own labour cannot be valued and claimed, though material costs can be.
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Can landlords claim travel expenses
Yes, if the journey is made wholly for rental business purposes. This includes inspecting the property, meeting contractors or tenants, arranging repairs, or attending to lettings administration.
You can claim mileage using the HMRC-approved rate, or actual fuel and maintenance costs for business journeys in your own vehicle. Public transport costs are also claimable. Keep records of date, destination, purpose, and mileage.
Your commute to a day job is not deductible, even if you stop at your rental property on the way.
Can landlords claim home office expenses
If you run your landlord business from a home office, you can claim a proportion of certain household costs. Work out a reasonable apportionment based on the proportion of your home used for business.
You might claim a proportion of council tax, utilities, insurance, and internet costs. You cannot claim for personal use of the home office, only business use. Be cautious: excessive home office expenses can create complications regarding capital gains tax when selling your home. Speak with your accountant about the safest approach.
Mortgage interest relief under Section 24
Mortgage interest works differently from other expenses and requires separate attention. Since April 2020, individual landlords cannot deduct mortgage interest directly from rental income as a standard expense.
Instead, mortgage interest receives relief through a tax credit equal to 20% of the interest paid. This is calculated after tax is worked out, not before. For higher-rate taxpayers, this means less relief is available than under previous rules. The borrowed money must be wholly for rental property purposes; interest on personal borrowing cannot be claimed. Speak with your accountant about how Section 24 affects your specific tax position.
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How to keep records of landlord expenses
HMRC requires records to be kept for at least four years. Professional practice typically retains records for six years. These should include all receipts, invoices, and bank statements relating to your rental business.
For each expense, prove what it was, when it occurred, the cost, and why it was a business expense. Digital records are now essential, particularly as Making Tax Digital reporting becomes mandatory for landlords with higher income. Categorise expenses as you incur costs, not at tax return time.
Example calculation of allowable expenses
A landlord with annual rental income of £12,000 has allowable expenses of £4,000 (letting fees, insurance, repairs, accountancy, council tax). Their taxable profit is £8,000. Tax is calculated on this figure, not the full rental income.
Mortgage interest is handled separately under Section 24 and does not reduce this taxable profit. It qualifies for a 20% tax credit calculated after income tax is worked out.
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Common mistakes landlords make when claiming expenses
Many landlords claim personal expenses unrelated to the letting. Confusing repairs with improvements cause costly mistakes. Mixing personal and business use of vehicles without working out realistic apportionment is common. Some claim expenses without keeping proper records. Others miss allowable expenses entirely, particularly professional fees or travel costs.
Keeping good records and understanding the rules reduces errors. If you’re unsure about any expense, ask your accountant rather than guessing.
For guidance on allowable expenses and your specific rental situation, speak with your local Ellis & Co branch.
