What counts as an allowable expense
Your taxable profit is your rental income minus your allowable expenses. Rental income includes rent, plus payments for furniture and for extra services you provide. Several UK properties count as one business, so their income and expenses are added together.
Usually allowable
- Repairs and general maintenance
- Water rates, council tax, gas and electricity you pay
- Landlord insurance: buildings, contents, public liability
- Letting agent and management fees
- Gardeners' and cleaners' costs
- Accountant's fees
- Legal fees for lets of a year or less, or renewing a lease under 50 years
- Ground rent and service charges
- Advertising for tenants, stationery and phone calls for the letting
- Vehicle costs, for the business part only
Not allowable
- Improvements, such as an extension or a higher-spec kitchen
- The capital part of mortgage payments
- Mortgage interest (it gets a credit instead)
- The initial cost of furnishing a property
- Work to make a run-down property fit to let for the first time
- Private phone calls and personal costs
- Costs you didn't pay yourself
Repair or improvement?
A repair restores something to the condition it was in. An improvement makes the property better than it was, and that's a capital cost, which isn't deductible against rent.
- Repairs: replacing storm-damaged roof tiles, fixing a broken boiler, redecorating between tenants, renewing a bath, basin or toilet like for like.
- Still a repair: replacing a part with the nearest modern equivalent, such as single glazing with double glazing, when the upgrade is incidental.
- Improvements: an extension, a new security system where there wasn't one, a kitchen replaced with a higher specification.
Keep records of capital costs. They may reduce a Capital Gains Tax bill when you sell.
Furniture and appliances
Replacing furnishings isn't treated as a repair. Instead, replacement of domestic items relief lets you claim the cost of replacing furniture, carpets and curtains, appliances and kitchenware in a let home, whether furnished or not.
- It's for replacements. The first purchase of items when you furnish a property isn't covered.
- If the new item is an improvement, you can only claim what a like-for-like replacement would have cost. For example, a £400 sofa replaced by a £550 sofa bed gives a £400 deduction.
- Deduct anything you get for the old item, such as a sale or part-exchange.
- It isn't available if you rent a room in your own home, or if you use the property allowance.
Mortgage interest is different
For residential lets, individual landlords can't deduct mortgage interest from rental profit. You get a tax reduction worth the basic rate of that interest instead, which is the rule often called Section 24. Only the interest counts, not the capital part of your payment. Section 24 explained covers how it works, and the tax calculator works out the result for you.
Expenses or the £1,000 property allowance?
You can claim up to £1,000 of property income tax-free instead of claiming your actual expenses. You can't do both, and you can't claim mortgage interest relief if you use it. It only helps if your real costs are below £1,000, and the tax calculator compares the two for you.
A worked example
A landlord receives £15,600 of rent in the year and pays these costs themselves:
| Cost | Amount |
|---|---|
| Letting agent fees | £1,200 |
| Repairs (boiler service, redecoration) | £600 |
| Landlord insurance | £350 |
| Accountant | £250 |
| Total allowable expenses | £2,400 |
Taxable rental profit is £15,600 − £2,400 = £13,200. That's the figure added to the landlord's other income. Any mortgage interest is dealt with separately through the tax credit.
Try itSee the tax on your own figuresTax calculator →Keep your records
Keep invoices, receipts and bank records for at least five years after the 31 January deadline for that tax year's return, with furnished and unfurnished lettings kept separate. Mileage logs help if you claim for business journeys.
Common questions
Can I claim for my own travel to the property?
You can claim the business share of vehicle running costs, including mileage rates for business journeys. Keep a log of journeys that were solely for the letting.
Can I claim for my phone and stationery?
Direct costs of the letting, such as calls to tenants and contractors, stationery and advertising, are allowable. Private calls aren't.
Can I claim for work done before the first tenant moved in?
Work to make a derelict or run-down property fit to let is an improvement, not a repair, so it isn't deductible against rent. It may help reduce Capital Gains Tax later.
What if I let a property to a relative at a low rent?
For an uncommercial let, expenses can only be deducted up to the rent you receive. That means no profit or loss, and the excess can't be carried forward.
Does the cash basis change what I can claim?
Cash basis is a simpler way to work out profit for straightforward lettings. It's optional, and you tick a box on your return if you prefer the standard method. Check the current rules on GOV.UK for whether you qualify.