If you’re earning rental income from a property, you’ll need to pay income tax on it. But there is some good news. There are a range of allowable expenses you can claim to reduce your tax bill. In this guide, we’ll walk you through exactly what landlords can claim and what HMRC’s rules actually mean in practice.
Important: Everything below applies to landlords living in the UK or overseas landlords with UK property.
The basic rule for landlord expenses
HMRC’s test for landlord expenses is straightforward: an expense must be “wholly and exclusively for the purposes of letting out a property from which you earned income.”
In other words, if it is purely to generate rental income or maintain your rental property, you can probably claim it. If it’s personal, or benefits you rather than your tenants, you can’t.
Maintenance and repairs
This is where landlords can get confused. HMRC makes a clear distinction between repairs (which you can claim) and capital improvements (which you can’t).
What counts as a repair?
Repairs restore your property to its original condition. Think:
- Fixing a broken boiler by replacing it with the same type
- Repairing a leaking roof
- Replacing broken windows with like-for-like replacements
- Fixing damaged plasterwork
- Repainting worn interior walls
These are all allowable expenses because you’re maintaining the property at its existing standard.
What counts as a capital improvement?
Capital improvements add value to the property or change its nature. For example:
- Upgrading to a larger, more powerful boiler
- Adding an extension or conservatory
- Converting a garage into a bedroom
These costs can’t be deducted as day-to-day expenses due to their capital nature.
Professional and legal fees
Most costs associated with managing your rental property are allowable:
- Letting agent fees
- Property management fees
- Landlord insurance
- Legal fees for renewing tenancy agreements or evicting tenants
- Accountancy fees for preparing your rental accounts
- Gas safety certificates
- Electrical safety certificates (EICR)
- Energy Performance Certificates (EPCs)
What about ground rent and service charges? These are typically the tenant’s responsibility when the property is occupied, so you can’t deduct them as expenses during those periods.
Mortgage interest
For non-residential properties
If you’re letting out a commercial property like an office or shop, you can usually deduct the full amount of mortgage interest from your rental income.
For residential properties (not furnished holiday lets)
You can’t deduct mortgage interest as a straightforward expense. Instead, you get a 20% tax credit based on your mortgage interest payments.
Here’s how it works: If you pay £200 in mortgage interest over the year, you get a tax credit of £40 (20% of £200). This credit reduces your final tax bill.
Travel expenses
You can claim travel costs directly related to managing your rental property:
Allowable:
- Fuel for trips to the property
- Public transport fares to visit the property
- Parking fees during property visits
Not allowable: Private or regular commuting. The travel must be specifically for your rental business – visiting the property for inspections, meeting tenants, overseeing repairs, or meeting with letting agents.
Rent a Room Scheme
If you’re renting out a furnished room in your main residence (the home you actually live in), you might be eligible for the Rent a Room Scheme.
This allows you to earn up to £7,500 per year tax-free from a lodger. If you earn more than this, you have two options:
Option 1: Use the Rent a Room relief Deduct £7,500 from your rental income and only pay tax on anything above that amount.
For example: If you earned £12,000 from your lodger, you’d deduct £7,500 to get £4,500 of taxable rental profit.
Important: This only applies if you’re renting a room in your main home and the room is furnished. It doesn’t apply to separate flats or unfurnished rooms.
Other allowable expenses
Here are some additional expenses landlords can claim:
Utilities and council tax – If you’re covering these costs when the property is empty between tenants
Cleaning and gardening – Costs for maintaining the property between tenancies or as part of your letting agreement
Contents and furnishings – Furniture, carpets, curtains, and white goods for furnished lettings (but not the initial furnishing when you first let the property)
Advertising – Costs of advertising your property for rent
Phone and internet – The proportion used for your rental business
Subscriptions – Landlord association memberships or property management software
What you can’t claim
- Your own time or labour (even if you do maintenance yourself)
- Capital improvements that enhance the property
- Personal expenses
- The initial cost of furnishing a property when you first let it
- Mortgage capital repayments (only the interest element potentially qualifies for relief)
Keeping good records
HMRC require you to keep records of your rental income and expenses for at least six years after the 31 January submission deadline.
Keep:
- Bank statements showing rental income
- Receipts for all expenses claimed
- Invoices from contractors and professionals
- Mortgage statements showing interest paid
- A mileage log if claiming vehicle expenses
- Tenancy agreements
Digital records are fine – in fact, with Making Tax Digital coming for landlords, getting used to digital record-keeping now will make your life easier later.
The bottom line on landlord expenses
HMRC’s rules for landlord expenses generally mean that if you spend money to earn rental income or maintain your rental property, you can probably claim it. The key is understanding the distinction between repairs (allowable) and improvements (not allowable), and keeping good records to back up your claims.
Need help with your rental property tax?
Making Tax Digital for landlords is coming this April. So now’s a great time to get your property tax affairs in order. Our landlord package includes expert guidance on allowable expenses, quarterly reviews, and full MTD compliance support.
