What Expenses Can Landlords Claim Against Rental Income?

If you rent out a property, you will normally pay tax on the profit from your property business rather than simply the total rent you receive.

Working out that profit means identifying which costs can legitimately be claimed. Some common expenses are straightforward, while others, particularly mortgage interest, property improvements and furniture, are treated differently.

This guide looks at some of the main expenses individual residential landlords may be able to claim against their rental income.

What is an allowable expense for a landlord?

Broadly, expenses incurred wholly and exclusively for the purposes of your property business may be deductible when calculating your taxable rental profit, subject to specific tax rules.

Common examples can include:

• Letting agent and management fees
• Accountancy fees relating to the property business
• Buildings and contents insurance
• Repairs and maintenance
• Utilities paid by the landlord
• Ground rent and service charges
• Council Tax where it is the landlord’s responsibility
• Cleaning and gardening
• Advertising for tenants
• Certain legal and professional fees

The expense must relate to the property business rather than your personal expenditure.

Can I claim repairs and maintenance?

Generally, the cost of repairing and maintaining a rental property can be allowable.

For example, this could include repairing a broken boiler, fixing a leaking roof or redecorating following normal wear and tear.

However, there is an important distinction between a repair and a capital improvement.

A repair broadly restores an asset to its existing condition. An improvement goes beyond that and enhances the property.

For example, replacing damaged kitchen units with a modern equivalent may still be a repair. Significantly extending or upgrading the property would be more likely to represent capital expenditure.

Capital expenditure isn’t normally deducted as an ordinary expense from rental income, although it may be relevant for other tax purposes.

Important

Something does not automatically become an improvement just because modern materials or technology are used. The circumstances and nature of the work need to be considered.

Can I claim the cost of furniture and appliances?

There is specific relief for replacing certain domestic items in residential rental properties.

Replacement of Domestic Items Relief can apply to items such as:

• Beds
• Sofas
• Curtains
• Carpets
• Fridges
• Crockery and cutlery

Broadly, the old item must stop being available for use by the tenant and the replacement must be provided for the tenant’s use.

If the new item represents an improvement over the old one, the deduction can be restricted to the cost of an equivalent replacement, subject to the detailed rules. Amounts received from disposing of the old item also affect the calculation.

This relief concerns replacements. The cost of initially furnishing a property isn’t automatically deductible under Replacement of Domestic Items Relief.

Can landlords claim mortgage interest?

This is one of the most commonly misunderstood areas.

If you are an individual landlord with residential property, mortgage interest and certain other finance costs are not simply deducted from rental income in the same way as ordinary property expenses.

Instead, qualifying residential finance costs can generally give rise to a basic-rate tax reduction, subject to the relevant restrictions.

The rules can apply to:

• Mortgage interest
• Interest on other loans used for the property business
• Certain overdraft interest
• Some fees and incidental costs associated with obtaining or repaying finance

The detailed calculation can also restrict the amount of the tax reduction available in a particular year, with unused qualifying finance costs potentially carried forward.

Important

Mortgage capital repayments are not the same thing as mortgage interest. Paying £1,000 to your lender does not mean you have a £1,000 deductible finance cost. The interest or qualifying finance element needs to be identified.

The treatment is also different for companies. A company paying Corporation Tax can generally deal with property-loan interest under the company tax rules rather than the individual residential-landlord restriction.

What about letting-agent fees?

Fees paid to a letting or property-management agent for managing the rental business will generally be allowable property-business expenses.

This can include costs connected with managing the tenancy and collecting rent.

However, the tax treatment of fees connected with acquiring a property or another capital transaction can be different.

The purpose of the fee matters, rather than simply the fact that it was paid to a solicitor, agent or other professional.

Can I claim accountancy and legal fees?

Accountancy fees incurred for the purposes of the property business can generally be allowable.

Certain legal and professional costs can also qualify, but there are restrictions. For example, professional fees relating to the purchase of a property are generally capital rather than ordinary rental expenses.

HMRC also distinguishes between certain costs relating to short leases and costs of a capital nature.

So it isn’t safe to assume that every solicitor’s bill connected with a rental property can simply be deducted from rental income.

Can I claim insurance?

Buildings and contents insurance relating to the rental property will generally be allowable.

Other insurance genuinely incurred for the property business may also qualify depending on its nature.

What about Council Tax and utility bills?

Where you, rather than the tenant, are responsible for costs such as:

• Council Tax
• Gas
• Electricity
• Water
• Certain service charges

those costs can generally be taken into account where they are incurred for the rental business.

If a cost partly relates to private use, an appropriate restriction may be necessary.

Can I claim for travelling to my rental property?

Costs genuinely incurred for the purposes of running the property business can potentially qualify, but travel claims depend on the circumstances and normal tax principles.

For example, travelling to deal with a repair or inspect a property may have a business purpose, whereas private travel cannot simply be turned into a property expense.

Good records should be kept showing why the journey was made and the costs incurred.

Can I claim expenses for running the property business from home?

Potentially.

Where a landlord genuinely runs the property business from home, additional costs incurred because of the business can potentially be claimed.

Depending on the circumstances, this can include additional heating and lighting and, where a particular part of the home is genuinely used for the property business, an appropriate proportion of certain costs.

The claim needs to reflect genuine business use rather than simply allocating household costs to the rental business without justification.

What is the £1,000 property allowance?

Individuals can potentially benefit from a property income allowance of up to £1,000.

Where applicable, it can provide relief against property income without claiming actual expenses.

However, you generally cannot use the £1,000 property allowance and deduct your actual property expenses against the same income. Whether the allowance or actual expenses produces the better result will depend on the circumstances.

There are also circumstances where the allowance isn’t available, so it should not automatically be assumed that every landlord can claim it.

What records should landlords keep?

You should keep sufficient records to support the rental income and expenses reported to HMRC.

These can include:

• Details of rent received
• Bank statements
• Invoices and receipts
• Letting-agent statements
• Mortgage-interest statements
• Insurance documents
• Details of repairs and maintenance
• Evidence relating to replacement domestic items
• Records supporting other property-business expenses

HMRC expects landlords to retain records of rental income and allowable expenses.

With Making Tax Digital for Income Tax now being introduced, digital record keeping is becoming increasingly important for landlords who fall within the MTD rules.

What changes from April 2027?

From 6 April 2027, separate Income Tax rates are due to apply to property income in England, Wales and Northern Ireland.

The announced rates for 2027/28 are:

The government has also confirmed that relief for restricted residential finance costs will be calculated using the 22% property basic rate from 2027/28.

The £1,000 property allowance is unchanged under the announced reforms.

Important

These changes apply from 6 April 2027. They should not be confused with the tax rates applying to property income in 2026/27.

What about furnished holiday lets?

The former Furnished Holiday Lettings tax regime has ended.

The special FHL Income Tax rules ceased from 6 April 2025, with the Corporation Tax regime ending from 1 April 2025. Former furnished holiday lets therefore should not simply be treated under the old FHL rules when considering current rental income and expenses.

How can Baldwin’s Accountancy Services help?

We can help landlords prepare their rental accounts, identify relevant income and expenses, complete their Self Assessment tax returns and understand how changes such as Making Tax Digital affect their reporting obligations.

Where bookkeeping support is required, we can also help keep property records organised throughout the year rather than reconstructing everything when the tax return is due.