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What is Capital allowances?
Last verified 31 October 2026
Capital allowances are a tax relief that lets a business deduct some or all of the value of an item from its profits before tax. They mainly cover plant and machinery, such as equipment and business vehicles.
Why it matters to landlords
For a landlord of ordinary residential lets they rarely apply. GOV.UK says that for a residential building you can only claim where the building has multiple residential units, like a block of flats, and the item is for a communal part, for example a table or lift in the entrance hall. HMRC's manual adds that capital allowances cannot be claimed on furniture and furnishings in the let dwelling itself. The Annual Investment Allowance lets you deduct up to £1 million of qualifying spending.
The replacement of a sofa or fridge in a flat is dealt with separately, under replacement of domestic items relief. Spending on buying, building or improving a property is capital and is not deducted from rent. Keep a record of it anyway, because it can reduce a capital gain when you sell.
Example
Ravi owns a block of six let flats. He spends £1,200 on a new table and seating for the shared entrance hall. Because the hall is a communal part of a multi-unit building, this can qualify for capital allowances. A new sofa in one of the flats would not, and goes through replacement of domestic items relief if it replaces an old one.
Allowable Expenses for Landlords (2026) →
Related terms
- Replacement of domestic items relief
- Structures and buildings allowance
- Capital vs revenue expenditure
- Enhancement expenditure
- Allowable expenses