Home / Glossary / Capital vs revenue expenditure
What is Capital vs revenue expenditure?
Revenue expenditure is the day to day cost of running a let, such as repairs, and is deducted from rental income. Capital expenditure buys or improves the property, and is not deducted from rent but may reduce Capital Gains Tax when you sell.
Why it matters to landlords
The test is usually whether you restored something to its previous condition or made it better. Replacing a worn kitchen with a similar modern one is generally a repair; adding an extension is an improvement.
Getting this wrong is one of the most common errors HMRC finds, so keep invoices and a note of what was replaced and why.
Example
Replacing single glazed windows with standard double glazing is normally treated as a repair, because it is the modern equivalent. Adding a conservatory is capital.
Allowable expenses for landlords →