What expenses can landlords claim against tax?

When you let out a property, you are running a business in the eyes of HMRC. Like any business, you can claim certain expenses that are wholly and exclusively for the purpose of generating rental income. These deductions help reduce your taxable profit, meaning you only pay tax on your actual earnings rather than your total rent received.

Understanding allowable expenses

Allowable expenses are costs that are necessary for maintaining and managing your rental property. They must be directly related to letting the property and not for personal use. HMRC uses the principle of “wholly and exclusively” to decide what qualifies.

For example, replacing a broken boiler is an allowable repair, but adding a new extension to the property is a capital improvement and not deductible against rental income.

Common allowable expenses for landlords

There are several categories of expenses that landlords can claim. These typically include:

Letting agent and management fees

If you use a letting agent to find tenants, collect rent, or manage maintenance, their fees are fully deductible. This also includes online listing fees and property management software.

Repairs and maintenance

Repairs to keep the property in working order are allowable, such as fixing leaks, painting, replacing worn carpets, or repairing windows. However, improvements that increase the property’s value, such as adding an en suite bathroom, are not deductible as revenue expenses.

Insurance

Landlords can claim for building, contents, and landlord liability insurance. The full cost of these premiums is deductible as long as they relate to the rental property.

Council tax, ground rent, and utilities

If the landlord pays for council tax, water rates, gas, or electricity rather than the tenant, these costs can be deducted. The same applies to ground rent and service charges on leasehold properties.

Professional fees

Legal and professional costs directly related to the property are allowable. Examples include:

• Accountant or tax advisor fees for rental income calculations

• Legal fees for tenancy agreements or evictions

• Costs of preparing inventories or safety certificates

However, fees for buying or selling a property are not deductible as these are capital costs.

Advertising and marketing

Costs to advertise your property to potential tenants, including online listings, photography, and signage, are fully deductible.

Replacement of domestic items

Since April 2016, landlords can claim the cost of replacing furnishings, appliances, and kitchenware in fully or partly furnished rental properties. This includes sofas, beds, carpets, fridges, and curtains.

You cannot claim for initial furnishings when setting up the property for the first time, only for replacements of existing items.

Service contracts and cleaning

Regular cleaning, gardening, and security services can be claimed if they are for communal or tenant areas. Similarly, service contracts for heating systems or appliances qualify as allowable expenses.

Travel and mileage

If you travel to your rental property for inspections, repairs, or meetings with tenants or agents, you can claim mileage or travel expenses. For cars, HMRC allows a flat rate of 45p per mile for the first 10,000 miles, then 25p thereafter. Keep clear records of each journey’s purpose and distance.

Accountancy and bookkeeping software

Subscription fees for software that helps you track rental income and expenses, such as Xero or QuickBooks, can also be deducted. These costs are part of running your rental business.

Mortgage interest and finance costs

In the past, landlords could deduct full mortgage interest payments as an expense. However, since April 2020, this has been replaced by a 20% tax credit for individual landlords.

This means you can no longer deduct the full cost from rental income, but you still receive a basic-rate tax reduction on your interest payments.

Limited companies are not affected by this rule and can still claim full interest deductions as part of their business expenses.

Other finance-related costs that remain deductible include:

• Arrangement fees for new loans

• Fees for remortgaging an existing buy-to-let property

• Bank charges on rental business accounts

Non-allowable expenses

Not every cost associated with your property can be claimed. The following are not allowable for tax purposes:

• Capital improvements that enhance or extend the property

• The full cost of buying or selling property, including Stamp Duty

• Personal expenses unrelated to letting

• Your own time spent managing the property

• Initial property furnishings when first let

However, capital improvements may qualify for Capital Gains Tax relief when you sell the property, so it’s still worth keeping records of those costs.

How to record expenses correctly

HMRC expects landlords to keep accurate and detailed records of income and expenses for each property. This includes receipts, invoices, bank statements, and mileage logs.

You must retain these records for at least five years after the Self Assessment submission deadline, or six years if you operate through a limited company.

Keeping digital records through accounting software can help you stay organised, especially as HMRC’s Making Tax Digital rules expand to landlords in the coming years.

Example of how expenses reduce tax

Suppose you receive £18,000 in annual rent and have the following costs:

• £2,000 in letting agent fees

• £3,000 in repairs and maintenance

• £1,200 in insurance and utilities

• £800 in professional fees

Your total expenses are £7,000, reducing your taxable profit to £11,000. If you are a basic-rate taxpayer, your Income Tax on the property will be £2,200 (20% of £11,000). Without these deductions, you would have paid £3,600, saving £1,400 through allowable expenses.

Furnished holiday lets

If your property qualifies as a furnished holiday let (FHL), you can claim additional benefits, including full mortgage interest deduction and Capital Allowances on furniture and equipment. However, you must meet strict conditions for availability and letting days to qualify.

These rules differ from standard buy-to-let properties, so it’s worth checking your eligibility if you let short-term or seasonal accommodation.

Common mistakes landlords make

Many landlords lose money by missing or misclassifying expenses. The most common errors include:

• Forgetting to claim mileage or travel costs

• Confusing capital improvements with repairs

• Not including VAT in total expense claims

• Claiming costs that were partly for personal use

• Failing to keep proof of payments

Being methodical with record keeping and seeking professional advice can prevent costly mistakes.

Professional advice and compliance

Tax rules for landlords change frequently, particularly around mortgage interest, digital reporting, and furnished holiday lets. An accountant who specialises in property taxation can help you stay compliant, structure ownership efficiently, and ensure all allowable expenses are claimed.

Professional advice becomes especially important if you own multiple properties, operate through a company, or plan to sell and reinvest.

Conclusion

Landlords can claim a wide range of expenses against their rental income, including management fees, repairs, insurance, utilities, and professional costs. These deductions reduce your taxable profit and ensure you only pay tax on your real earnings.

By keeping accurate records, understanding what qualifies as an allowable expense, and seeking advice when needed, you can manage your rental business efficiently and stay fully compliant with HMRC.