Landlord Allowable Expenses: What You Can Claim Against Rental Income
Landlords who receive rental income must pay Income Tax on their profit — rental income minus allowable expenses. Understanding which expenses HMRC permits as deductions directly reduces your tax liability. This guide explains the main categories of allowable expenses for residential landlords in England, the distinction between revenue and capital expenditure, and the rules on mortgage interest relief. It is derived from HMRC guidance and the Income Tax (Trading and Other Income) Act 2005. It is not tax advice — always consult a qualified accountant for advice specific to your situation.
Tax rules for landlords are complex and change regularly. This guide provides an overview of the main categories of allowable expenses based on HMRC guidance as at April 2026. Your specific position depends on your personal circumstances, the type of property let, and how you hold the property. Always consult a qualified accountant or tax adviser before submitting your tax return.
The basic principle
Landlords pay Income Tax on their net rental profit — the rental income received minus allowable expenses. HMRC allows deductions for expenses that are incurred wholly and exclusively for the purposes of the rental business. Expenses with a dual purpose (partly personal, partly business) are generally not deductible unless the business element can be clearly identified and separated.
Expenses must be for revenue purposes — ongoing costs of running the property — not for capital purposes (improving or enhancing the property). This distinction is one of the most important and frequently misunderstood aspects of landlord taxation.
Revenue expenditure vs capital expenditure
This is a critical distinction. Revenue expenditure is allowable as a deduction in the year it is incurred. Capital expenditure is not — instead it may qualify for capital allowances or be taken into account when calculating Capital Gains Tax on disposal.
- Revenue expenditure — repairing or maintaining the property in its existing condition. Replacing like-for-like: a broken boiler replaced with an equivalent boiler is repair. Replacing a single-glazed window with a single-glazed window is repair.
- Capital expenditure — improving the property beyond its original state. Replacing single-glazed windows with double-glazed windows is an improvement. Adding an extension, loft conversion, or new kitchen beyond the original specification is capital expenditure.
The line between repair and improvement is frequently disputed and depends on the specific facts. HMRC's guidance (PIM2020) provides worked examples. Where there is doubt, take professional advice before treating expenditure as revenue.
Main categories of allowable expenses
Letting agent fees and management charges
Fees paid to a letting agent for finding tenants, managing the property, or collecting rent are allowable. This includes tenant-finding fees, management fees, and tenancy renewal fees.
Repairs and maintenance
Costs of repairing or maintaining the property in its existing condition are allowable — fixing a leaking roof, repairing a broken boiler, redecorating between tenancies, mending fences. The work must restore rather than improve.
The Replacement of Domestic Items Relief allows landlords to deduct the cost of replacing domestic items such as furniture, appliances, and kitchenware on a like-for-like basis. The original purchase cost of furnished items is not deductible, but replacement costs are.
Buildings and contents insurance
Landlord buildings insurance and landlord contents insurance premiums are allowable expenses.
Utility and service charges (where paid by the landlord)
Where the landlord pays utilities — gas, electricity, water — or service charges for a leasehold property and these are not recharged to the tenant, these are allowable.
Council Tax (where paid by the landlord)
Where the landlord pays Council Tax — typically during void periods — this is an allowable expense for the period it is paid.
Professional fees
Accountancy fees for preparing rental accounts, legal fees relating to the rental business (not property purchase), and fees for renewing or managing tenancy agreements are allowable. Legal fees for acquiring or disposing of a property are capital and not allowable as a revenue deduction.
Advertising costs
Costs of advertising the property for let — including online listing fees — are allowable.
Ground rent and service charges
For leasehold properties, ground rent and service charges paid by the landlord are allowable where they are not recovered from the tenant.
Mortgage interest relief
The treatment of mortgage interest is one of the most significant changes to landlord taxation in recent years. Individual landlords (not companies) can no longer deduct mortgage interest as an expense from rental income. Instead, basic rate tax relief (currently 20%) is available as a tax credit against your tax liability.
The practical effect depends on your tax position:
- Basic rate taxpayers receive equivalent relief through the tax credit.
- Higher and additional rate taxpayers receive only 20% relief, not the higher rate — meaning the net cost of mortgage interest is effectively higher than before the restriction was introduced.
This change applies to individual landlords only. Landlords who hold properties through a limited company are not subject to this restriction — corporate landlords can still deduct mortgage interest as a business expense. The decision whether to hold property personally or through a company has significant tax implications and should be made with professional advice.
What you cannot claim
- Capital improvements — adding value beyond the original state
- Private or personal expenditure
- The original purchase cost of furnishings (only replacements qualify)
- Legal costs of purchasing or disposing of the property
- Your own time or labour (unpaid)
- Costs relating to periods before the property was let
- Mortgage interest as an expense (replaced by the 20% tax credit for individuals)
Record-keeping
HMRC requires landlords to keep records supporting all expense claims for at least five years from the 31 January following the end of the relevant tax year. Records should include receipts, invoices, bank statements, and any other documentation supporting the deduction claimed. Under Making Tax Digital for ITSA, landlords above the relevant income threshold must maintain digital records contemporaneously.
A poor record is one of the most common reasons HMRC challenges a landlord's tax return. Keep a running record of expenditure with receipts attached — do not reconstruct records at the end of the year from memory.
Expenses and Making Tax Digital
From April 2026, landlords with gross rental income above £50,000 must comply with Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). Under MTD, expenses must be recorded digitally using compatible software and submitted quarterly to HMRC as part of the quarterly update process. The categories used in quarterly submissions broadly align with the allowable expense categories above. See the MTD for landlords guide for details on compliance.