Landlord allowable expenses: what you can claim against tax

Every pound of genuine cost you don’t claim is tax you didn’t need to pay. Here’s what UK landlords can deduct from rental income — and the one big rule that trips everyone up.

What you can claim

If a cost is wholly and exclusively for running the let, it’s usually allowable. The common ones:

• Repairs & maintenance — fixing the boiler, decorating, replacing a broken fixture. No minimum — even a £40 repair counts.
• Letting agent & management fees.
• Buildings and contents insurance (landlord policy).
• Ground rent and service charges on leasehold flats.
• Utilities and council tax — where you, not the tenant, pay them (e.g. between tenancies).
• Accountancy and legal fees for the letting (including possession costs and rent written off as bad debt).
• Advertising to find tenants.
• Travel to inspect or manage the property, at HMRC’s approved mileage rate.

The big one: mortgage interest and Section 24

This is where most landlords lose money by misunderstanding the rules. Since the Section 24 change, individual landlords can no longer deduct mortgage (finance) interest from rental profit. Instead you get a tax reducer worth 20% of your finance costs, applied against your tax bill. So on £4,000 of mortgage interest you get an £800 reduction in tax — not £4,000 off your taxable profit. For higher-rate taxpayers that’s a real cost, since the old rules gave relief at your full rate.

One exception: limited companies still deduct mortgage interest in full before corporation tax — which is why some portfolio landlords look at incorporating. That’s a decision to take with an accountant, not lightly.

Replacement of Domestic Items relief

The old 10% wear-and-tear allowance is gone. Instead, you can claim the cost of replacing domestic items in a furnished let — sofa, fridge, carpets, curtains — minus anything you got for the old one. It’s like-for-like: if you upgrade to something fancier, you can only claim what a similar replacement would have cost. And it’s replacements only — not the first time you kit the place out.

Repairs vs improvements — the line that matters

A repair restores; an improvement betters. Repairing a worn worktop is an allowable repair. Fitting a brand-new kitchen or building an extension is a capital improvement — you can’t claim it against this year’s income, though it does add to your cost base and reduces Capital Gains Tax when you sell. Using a modern equivalent (double glazing to replace single) usually still counts as a repair.

Common questions

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