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What is Service charges and ground rent?
Last verified 31 October 2026
Service charges and ground rent are the payments a leaseholder makes to the freeholder or managing agent for upkeep of the building and for the right to occupy the land. For a let property, HMRC lists both as allowable expenses if you pay them yourself.
Why it matters to landlords
The test is that the cost is wholly and exclusively for the rental business. If you let only part of a property, only the share relating to the let part is allowed, and HMRC says the same treatment should apply to ground rent. Capital improvements are not allowable, so if a service charge includes the cost of improving the building rather than maintaining it, ask the managing agent for a breakdown.
The other direction matters too. If you provide services to your tenants, such as cleaning or gardening, the cost is deductible but the amount you charge for them counts as rental income. HMRC's example has £9,600 of rent and £1,200 of cleaning and gardening costs, with both in the property business.
Example
Marcus owns a leasehold flat in Leeds that he lets out. This year he pays £1,800 of service charge and £250 of ground rent. Both are recorded as expenses, so £2,050 comes off his rental income before tax. A £3,000 charge in the same year for a new lift would be checked first, as it may be capital.
Allowable Expenses for Landlords (2026) →