The difference between a landlord who tracks expenses properly and one who does not is often a few hundred pounds of tax per property, every year. Most landlords claim something, but the common ones get missed, the repairs-versus-improvements line gets crossed, and mortgage interest gets put in the wrong place. This guide sets out what you can claim, what you cannot, and the rules that decide the difference.
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The one rule everything hangs on
Every allowable expense has to pass a single test: it must be incurred wholly and exclusively for the rental business. That phrase comes straight from the tax legislation, and it is the thing HMRC checks. A cost that is purely for letting the property qualifies. A personal cost does not. A cost that is partly both can sometimes be apportioned, so you claim only the business share, but only if that share is clearly identifiable. If it is not, HMRC can disallow the whole thing.
Keep that test in mind and most of the grey areas resolve themselves.
What you can claim
These are the everyday running costs HMRC accepts when they relate wholly to the letting:
- Repairs and maintenance: fixing a boiler, repainting between tenancies, mending a leak, replacing a broken window like-for-like. The key word is restore, not improve (more below).
- Letting agent and management fees: tenant-finding, rent collection, full management, inventory, renewals.
- Insurance: landlord buildings and contents, public liability, rent guarantee, appliance cover. Personal policies like life insurance do not count.
- Professional fees: accountancy for your rental tax, legal fees for tenancy agreements and tenant management. Legal fees for buying the property are capital, not allowable.
- Utilities and council tax you actually pay: if you cover gas, electricity, water, broadband, or council tax (common in HMOs and serviced lets), those are claimable. If the tenant pays them, they are not yours to claim.
- Ground rent and service charges: where you, as landlord, are liable.
- Travel: journeys made wholly for the rental business, such as inspections or meeting contractors, at HMRC mileage rates (45p per mile for cars) or actual public transport cost.
- Administrative costs: stationery, phone use for the property business, accounting software, and a reasonable home-office share if part of your home is used for managing the lettings.
- Replacement of Domestic Items Relief: the cost of replacing furniture, white goods, carpets, and curtains in a furnished or part-furnished let, on a like-for-like basis.
What you cannot claim
The disallowed list is where landlords trip up:
- Mortgage capital repayments. Only the interest part of a mortgage is relevant, and even that is not a normal expense (see Section 24 below). The capital portion that reduces your loan balance is never claimable.
- Property improvements. Anything that makes the property better than it was, rather than restoring it, is capital expenditure, not an expense.
- The initial cost of furnishing a property for the first time. The relief covers replacements, not the first purchase.
- Your own labour. Work you do yourself on the property is not an allowable expense.
- Personal costs, or the personal share of any mixed cost.
- The cost of buying the property and associated purchase legal fees. These are capital and may count against Capital Gains Tax when you sell, so keep the records, but they do not reduce your rental income.
The repairs-versus-improvements trap
This is the single most common landlord tax error, so it is worth being precise. A repair restores the property to its original condition and is fully deductible: fixing the roof, servicing the boiler, replacing a worn worktop with a similar one. An improvement makes the property better than it started: an extension, a loft conversion, ripping out a basic kitchen for a high-end one, replacing single glazing with double glazing where it is a genuine upgrade. Improvements are capital. They do not reduce your rental income now, but they add to your base cost for Capital Gains Tax later, so the records still matter.
Like-for-like replacement of something worn out is a repair. Upgrading it is an improvement. Get that line right and you avoid both overclaiming (which invites enquiry) and underclaiming (which costs you money).
Where mortgage interest fits
Mortgage interest is the big exception to the normal expense rules. Since April 2020, individual landlords cannot deduct residential mortgage interest as an expense at all. Instead it is a finance cost that gives you a tax credit worth 20% of the interest, applied to your tax bill rather than your profit. This is Section 24, and for higher-rate taxpayers it makes a real difference, because they get 20% relief where they used to get 40%. It is enough of a topic on its own that we cover it separately in Section 24 explained, and you can model your own position with the Section 24 calculator.
One forward-looking note: under the Finance Act 2026, a separate property basic rate of 22% is due from April 2027, and the Section 24 credit is set to track it up from 20% to 22% for 2027/28 onwards. Worth knowing, though the 20% figure is what applies for now.
The £1,000 property allowance
If your total rental income for the year is £1,000 or less, you generally pay no tax on it and do not need to tell HMRC. If it is a bit more, you can choose to deduct a flat £1,000 property allowance instead of your actual expenses. That only makes sense when your real expenses are below £1,000, and you cannot claim both the allowance and actual costs in the same year, so it is one or the other, whichever leaves you better off. If you own a property jointly, each owner can use their own £1,000 allowance against their share.
Why this matters more under MTD
Now that Making Tax Digital is live, expenses are not a once-a-year January exercise. You report income and costs quarterly, so the categorisation has to be right as you go, not reconstructed at year end. This is where good software earns its place: a bank feed pulls in your transactions, categorises them, separates finance costs from ordinary expenses, and flags the repairs-versus-improvements question while you still remember what the spend was for. Done well, the quarterly update is a review, not a data-entry marathon. See our MTD for landlords guide for the filing side.
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This guide is general information about allowable expenses for landlords in England and is not tax advice. Rules and figures are based on HMRC guidance current at the time of writing and can change. Check GOV.UK or speak to a qualified tax adviser for your own circumstances.