Allowable Expenses for Landlords: What You Can Claim

Understanding allowable expenses for landlords is essential for anyone earning rental income in the UK. In tax terms, allowable expenses for landlords are the costs that can be deducted from rental income to calculate taxable profit. These costs are often referred to as rental income allowable expenses, allowable property expenses, landlord tax deductions and property income allowable expenses. 

These terms all refer to the same core principle, the ability to claim specific running costs that are incurred wholly and exclusively for the rental business. In practice, this determines what expenses I can claim as a landlord and what a landlord can claim against tax without risking HMRC scrutiny.

Accurate claims matter because they directly influence tax liability. When allowable expenses on rental income are calculated correctly, landlords avoid overpaying tax and ensure compliance with HMRC landlord expenses guidance. 

The wholly and exclusively rule sits at the centre of HMRC’s approach to property taxation, and it forms the test that determines whether a cost counts as a landlord allowable expense or becomes a non-deductible personal or capital cost. According to Simply Business UK, misclassifying these items is one of the most common reasons for tax errors among landlords.

This article will explain allowable expenses for landlords in depth, covering everyday rental property expenses, specialist rules such as replacement of domestic items relief and the updated finance cost rules. 

It will also highlight common pitfalls, provide practical examples, and show how to approach your rental property expenses checklist with clarity. 

The goal is to provide a comprehensive and structured understanding of what constitutes allowable expenses for landlords and how these rules relate to broader UK tax treatment for property businesses.

What counts as allowable expenses when letting a property?

When assessing allowable expenses for landlords, the first step is understanding how HMRC determines whether a cost is claimable. Most queries in this area come from questions such as what expenses can I claim as a landlord or what can a landlord claim against tax, and the answer comes back to the wholly and exclusively test. This test states that a cost must arise solely because the property is being rented out. If a cost has a dual purpose, meaning it serves both personal and business use, it will usually fall outside the list of allowable expenses on rental income.

How does the wholly and exclusively rule work in practice?

The wholly and exclusively rule is explained in detail in HMRC guidance and in summaries from sources such as chancellors.co.uk. It requires the landlord to show that the expense would not have occurred without the rental activity. 

For example, paying for a safety certificate or repairing a damaged roof qualifies because these costs relate entirely to the rental property. If a landlord uses a personal phone contract to call tenants, only the rental-specific portion relates to rental income allowable expenses. This distinction affects all landlord expenses, from utilities to administrative costs.

What is the difference between revenue and capital expenses?

Another fundamental distinction when identifying allowable expenses for landlords is the difference between revenue and capital expenditure. Revenue expenses are routine running costs that maintain the property in its current condition. These qualify as allowable property expenses and form a major part of any rental property expenses checklist. 

Capital expenses relate to improvements, structural changes or upgrades that increase the property’s value. They do not qualify as landlord allowable expenses for income tax, but may become relevant for capital gains calculations on a future sale.

For example, repairing a broken boiler is classified as revenue expenditure and counts as allowable expenses for rental income. Replacing the boiler with a significantly upgraded system is a capital expenditure because it improves the property beyond its original state. 

The distinction is important because landlords often misclassify improvements as repairs, which leads to inaccurate claims under property income allowable expenses.

Why does the revenue versus capital distinction matter for tax?

This distinction matters because capital improvement costs cannot be deducted from rental income. Instead, they form part of the property’s base cost for capital gains tax. Simply Business UK notes that misunderstanding this point is one of the primary causes of incorrect landlord tax deductions. When preparing your own rental property expenses checklist, separating these two categories early prevents inaccuracies later and ensures each cost falls under the correct tax treatment.

Which common landlord expenses are fully deductible against rental income?

Once the principles behind allowable expenses for landlords are clear, the next step is to understand the categories of costs that qualify in practice. These categories form the backbone of most landlord tax deductions, and they appear consistently across HMRC guidance and professional accounting sources. Each category below represents a different type of revenue expense that supports the rental business, and each plays a distinct role within property income allowable expenses.

What repair and maintenance costs qualify as allowable expenses?

Repairs and maintenance are central to rental income allowable expenses because they preserve the property’s existing condition. Examples include fixing structural defects, performing boiler repairs, treating damp, repairing windows, restoring damaged walls and repainting between tenancies. These costs meet the wholly and exclusively test because the property must remain safe and functional. None of these items count as improvements, so they qualify as landlord allowable expenses across most scenarios.

Can landlords claim utilities, council tax or service charges?

Where the landlord pays utilities, council tax, service charges, or ground rent, these qualify as allowable expenses for rental income. This is common during void periods or where the rent includes bills. Belvoir notes that these charges remain deductible because they are necessary for operating and managing the property. They also fall clearly within allowable property expenses because the landlord incurs them directly as part of the rental arrangement. These are distinct from personal household costs and should be categorised separately within landlord expenses records.

Are insurance premiums deductible?

Insurance premiums linked to the rental business are fully deductible. This includes buildings insurance, contents insurance for furnished properties and landlord liability insurance. Simply Business UK confirms that these premiums meet the wholly and exclusively criteria because they protect the rental activity. They form part of property income allowable expenses and appear on most rental property expenses checklists prepared for UK tax returns.

Which professional and management fees qualify as allowable?

Professional fees create another major category within allowable expenses for landlords. These include letting agent fees, property management fees, accountant fees and legal fees associated with tenancy renewals under 50 years. Each of these qualifies as a landlord allowable expense because they are incurred for running the rental business. Fees related to property purchases or major legal disputes do not qualify, so clear record-keeping helps ensure correct classification.

What advertising and administrative costs can landlords claim?

Advertising for tenants, online listings, printed ads, phone calls with prospective renters, stationery, postage and bookkeeping software costs all count as allowable expenses on rental income. These administrative costs directly support finding tenants, maintaining records or managing communication. Which UK identifies them as common allowable property expenses across most rental business setups.

Are travel and inspection costs tax-deductible?

Travel costs qualify where they relate solely to rental business purposes. This includes travel for property inspections, maintenance visits and rent collection. Fraser Bond explains that mileage, public transport costs and similar travel can be included as rental income allowable expenses when supported by accurate records. These costs are strictly business-related, so personal travel is not claimable.

READ RELATED ARTICLE: Accounting for Landlords: Bookkeeping Best Practices

Can mortgage interest and finance costs still be claimed as expenses?

This area requires clarity because UK rules changed significantly after 2020, which affects how allowable expenses for landlords are calculated today. Before the rule change, landlords could deduct full mortgage interest as part of their rental property expenses. After the change, mortgage interest became a finance cost that attracts a 20 per cent tax credit instead of a full deduction. This distinction influences how landlords calculate allowable expenses for rental income and how they structure their long-term property finance.

How did the finance cost rules change?

Since April 2020, landlords cannot deduct the full mortgage interest from rental income. Instead, the interest element, along with arrangement fees or bank charges tied to the loan, qualifies for a 20 per cent tax credit. Landlord Studio summarises this rule and highlights that the shift has increased taxable profits for some landlords, especially those with high leverage. These costs still feature within landlord expenses but sit under a different mechanism than conventional allowable property expenses.

What is the difference between interest and capital repayments?

Capital repayments do not count as allowable expenses for landlords because they reduce the loan balance rather than representing a business cost. Only the interest portion attracts the 20 per cent credit. Simply Business UK explains that this prevents landlords from claiming the repayment of their loan as a deduction, which aligns with wider UK tax principles. This distinction is essential for understanding what expenses I can claim as a landlord when reviewing financial statements.

Can limited companies still deduct finance costs?

There are scenarios where limited companies can still deduct finance costs as part of the rental income allowable expenses. GHLD notes that companies are taxed under corporation tax rules, which treat finance costs differently. This creates contrasting outcomes depending on whether a landlord holds property personally or through a company, and it affects long-term planning around landlord tax deductions.

How does the 20 per cent mortgage interest credit work?

A simple example helps clarify the change. If a landlord pays £5,000 in mortgage interest over a tax year, the 20 per cent credit provides £1,000 of tax relief. Before 2020, the full £5,000 would have reduced taxable rental income. This demonstrates how the calculation of allowable expenses for landlords has evolved and why finance costs need special consideration in any rental property expenses checklist.

What is the “Replacement of Domestic Items Relief” and when does it apply?

Many landlords struggle to understand how the replacement of domestic items relief works because the rule has several conditions that affect whether an item qualifies. Since this relief helps reduce taxable profit and forms part of the core list of allowable expenses for landlords, it is essential to understand how it works in practice. This section clarifies the criteria, shows where the relief applies, and explains how it interacts with allowable expenses on rental income and wider landlord tax deductions.

What does the replacement of domestic items relief actually cover?

The replacement of domestic items relief allows landlords to claim the cost of replacing domestic items used inside a rental property, as long as the new item is a like-for-like substitute. The relief applies to furniture, furnishings, kitchenware, white goods and textiles. This list includes beds, sofas, tables, chairs, curtains, carpets, fridges, ovens, dishwashers, wardrobes and cookware. These are all considered domestic items because tenants use them in their day-to-day occupation.

This list is important because landlords sometimes incorrectly assume that only fully furnished properties qualify. However, the relief applies whether a property is furnished, part-furnished or unfurnished. HMRC landlord expenses guidance makes this clear and stresses that the purpose of the relief is to ensure landlords can maintain the property at a rentable standard. This is directly relevant when discussing allowable expenses for rental income and the broader category of landlord expenses.

How does the like-for-like rule affect eligibility?

The relief only applies to like-for-like replacements. If a landlord replaces a basic fridge with a high-end smart appliance, only the cost equivalent to the old appliance can be claimed. The excess amount is treated as an improvement and therefore does not qualify. This limitation prevents landlords from claiming capital upgrades as landlord allowable expenses. When asking what expenses I can claim as a landlord, this rule becomes crucial. Upgrades fall into the category of capital improvements, which are not part of allowable property expenses and must be excluded from rental income allowable expenses.

When did this relief replace the old wear and tear allowance?

Before April 2016, landlords with fully furnished properties could claim a flat 10 per cent wear and tear allowance. That allowance no longer exists. The replacement of domestic items relief is now the official method for claiming costs related to furnishings. This change means landlords must track actual expenditure rather than relying on a percentage of rent. It also reinforces why a rental property expenses checklist is valuable. It ensures that landlords remain compliant and do not rely on outdated rules when calculating property income allowable expenses.

What expenses cannot be claimed, and why does it matter?

Understanding what cannot be claimed is as important as knowing the allowable expenses for landlords. Incorrect claims can lead to HMRC challenges, amended returns and penalties. This section explains which types of rental property expenses are disallowed and why landlords must avoid including them in their allowable expenses on rental income calculations.

Why are capital improvements excluded from rental deductions?

Capital expenditure includes costs that enhance or improve a property rather than maintain it. Extensions, loft conversions, new bathrooms, new kitchens, structural alterations and upgrades fall into this category. These costs cannot be deducted from rental income because they are not considered revenue expenses. This rule forms a core part of HMRC landlord expenses guidance because capital improvements contribute to future value rather than maintaining the existing condition. Although these costs may be relevant when calculating Capital Gains Tax on a sale, they are not part of rental income allowable expenses.

How do personal or mixed-use costs affect eligibility?

Personal expenditure and mixed-use costs do not qualify as allowable property expenses. If a landlord uses a personal phone contract for tenant communication, only the portion used for the rental business can be claimed. Similarly, travel that includes personal errands cannot be claimed in full. These costs must meet the wholly and exclusively rule to count as landlord tax deductions. When landlords ask what expenses I can claim as a landlord, this distinction is essential because personal spending cannot form part of allowable expenses for landlords under any circumstance.

Why are property acquisition costs excluded?

The purchase price, stamp duty, conveyancing fees and survey costs are capital costs linked to the acquisition of the property. These are not rental business expenses. They are part of the investment activity, not the ongoing running costs. Therefore, they cannot be included in allowable expenses on rental income, even if they are substantial. Understanding this distinction helps landlords maintain accurate property income, allowable expenses, and prevents misclassification on tax returns.

Why are furnishing upgrades restricted?

Even though the replacement of domestic items relief exists, upgrades to furnishings cannot be treated as landlord-allowable expenses. Only like-for-like costs qualify. Any amount that improves the quality or capacity of the item becomes capital expenditure. This rule frequently appears on rental property expenses checklist templates because it is a common source of error and a frequent cause of HMRC queries.

How can landlords claim allowable expenses and maintain accurate records?

To remain compliant and maximise allowable expenses for landlords, every landlord must follow the correct process using accountants for landlords. This section explains how to complete the relevant tax forms, how to keep records, and how to track rental income and allowable expenses across multiple properties.

What forms must be completed for rental income?

Landlords must submit the SA105 supplementary property form with their Self Assessment tax return. This form records rental income, allowable expenses for rental income, finance costs, losses and property-related adjustments. Filing the form ensures HMRC receives a clear breakdown of landlord expenses and helps prevent errors. More details are available on GOV.UK.

Why does record-keeping matter?

Receipts, invoices, bank statements, tenancy agreements, repair logs and dated evidence all help verify that the cost is part of allowable expenses for landlords. Record-keeping proves that costs satisfy the wholly and exclusively requirement. This reduces the risk of HMRC challenges and supports accurate landlord tax deductions. Good records also help maintain clarity on what a landlord can claim against taxes during the year.

How are multiple properties aggregated?

HMRC requires landlords to combine the income and property income allowable expenses from all UK rental properties when calculating total profit or loss. This simplifies the process and ensures consistency across the portfolio. The combined figure determines whether losses are carried forward and how rental property expenses influence tax liability.

What happens if allowable expenses exceed rental income?

If rental property expenses are higher than rental income, the landlord generates a loss. Losses can be carried forward to offset against future rental profits. This provides a long-term tax benefit and encourages consistent tracking of landlord allowable expenses year after year.

How does the accounting basis affect expense recognition?

Most landlords use the cash basis of accounting, especially those with rental income below the threshold. Under the cash basis, income and expenses are recognised when money is received or paid. Under the accrual basis, income and expenses are recognised when earned or incurred. This affects timing and can influence how allowable expenses for landlords appear in a particular tax year.

READ RELATED ARTICLE: Rental Income Tax UK Guide for Landlords & Accountants

What common errors do landlords make when claiming expenses, and how can they be avoided?

Even when landlords understand allowable expenses for landlords, practical mistakes still occur. These errors lead to incorrect claims and potential HMRC checks. This section highlights the most frequent issues and offers preventative strategies.

Why do landlords incorrectly classify improvements as repairs?

A common mistake is treating improvements as repairs. For example, installing a new kitchen instead of repairing the existing one is an improvement and not part of allowable expenses on rental income. Landlords should keep clear before-and-after photos to demonstrate that work was a repair rather than an upgrade.

How does incorrect apportionment cause issues?

If a landlord uses a personal phone or vehicle, only the portion used for the rental business qualifies as allowable property expenses. To avoid errors, landlords should maintain mileage logs, itemise phone usage or consider a self-assessment accountant.

Why do some landlords misuse the replacement relief?

Claiming the full cost of upgraded furnishings breaches the like-for-like rule. To avoid this, landlords should document the original item, record the replacement cost and ensure the claimed amount reflects the original value.

How do missing receipts affect HMRC compliance?

Without receipts or bank statements, HMRC may not accept the expense. Landlords should store digital copies and maintain a structured filing system to support landlord tax deductions and property income allowable expenses.

Why do landlords confuse mortgage repayments with allowable costs?

Only mortgage interest qualifies for the finance cost tax credit. Capital repayments do not qualify. A clear rental property expenses checklist helps prevent misclassification and ensures compliance with HMRC landlord expenses rules.

READ RELATED ARTICLE: Accountants for Landlords and Rental Property Tax Advice

How replacement relief, property allowance and finance cost changes affect net rental profit

Understanding how different reliefs interact is essential when evaluating allowable expenses for landlords, especially when overall rental profitability depends on accurate calculations. Replacement of domestic items relief works alongside general allowable property expenses because it covers a specific category of costs that arise when landlords replace furniture, appliances or household items in a let property. While these costs fall under landlord allowable expenses, they must still pass the like-for-like requirement to be treated as legitimate rental income allowable expenses. Landlords who plan refurbishments between tenancies often benefit most, since replacements can be timed strategically and recorded clearly to maximise landlord tax deductions without breaching the rules.

Finance cost restrictions introduced after 2020 also influence how allowable expenses for landlords function in practice. Since full mortgage interest is no longer deductible, the 20 per cent tax credit places greater emphasis on claiming every eligible cost under rental property expenses. The shift makes it even more important to maintain a reliable rental property expenses checklist so that no small but allowable expenses on rental income are missed. When finance costs become more limited, landlords often rely more heavily on other deductible categories to reduce taxable income and manage HMRC landlord expenses across the year.

How the property income allowance fits into the overall strategy

Some landlords may choose the property income allowance instead of itemising what expenses they can claim as a landlord. This allowance offers a simplified route for those with minimal landlord expenses, although it can lead to a lower deduction than listing detailed property income allowable expenses. The trade-off is reduced paperwork, although landlords must be aware that once the allowance is used for a tax year, individual expenses, including replacement of domestic items relief, cannot be claimed for that same period.

Special considerations for multiple properties and limited companies

Landlords managing multiple units or operating within a mixed rental and business structure must apply the rules carefully. Income and expenses are usually pooled for tax calculations, but certain finance costs may still be deductible in full for limited companies. This creates a different tax position compared to individual landlords relying on the tax credit. Understanding this distinction helps landlords make informed decisions about what a landlord can claim against tax, especially when balancing rental income and allowable expenses with company-level planning.

Example scenario, calculating net rental income with allowable expenses

A worked example helps demonstrate how allowable expenses for landlords affect the final taxable profit. Assume a rental property generates £15,000 per year in rent. The landlord has the following landlord expenses:

Repairs and maintenance, £1,200
Insurance premiums, £300
Letting agent fees, £1,500
Utilities during void periods, £400
Replacement of domestic items: relief for a like-for-like fridge, £450
Finance costs, mortgage interest of £5,000

Step one is calculating total allowable property expenses. Repairs, insurance, agent fees and utilities sit within allowable expenses for rental income because they are wholly for the rental business. That produces £3,400 in deductions. The replacement of domestic items relief adds £450 because the fridge replacement meets the criteria. The total allowable expenses on rental income now equal £3,850.

Step two is applying the finance cost credit. Under the current rules, the landlord cannot deduct the £5,000 interest from rental income, but receives a tax credit worth 20 per cent of interest paid. This results in a £1,000 credit.

Taxable rental profit is therefore calculated as follows.
£15,000 rental income minus £3,850 allowable property expenses equals £11,150 taxable profit before finance cost relief. The £1,000 credit reduces the landlord’s tax bill but does not reduce the profit figure itself.

Impact of improvements versus like-for-like replacements

If the landlord had replaced the fridge with a more expensive model costing £900, only the like-for-like portion of £450 would be included under landlord allowable expenses. The remaining £450 would be treated as an improvement and would not qualify as rental income allowable expenses. This shows how closely HMRC landlord expenses rules scrutinise the nature of property replacements.

Treatment of losses

If expenses had exceeded income, such as a scenario where major repairs created £16,000 of costs, the landlord would generate a rental loss. Under HMRC rules, this loss cannot be offset against other income categories, but it can be carried forward to future years to reduce taxable rental profits that arise later. This becomes a key planning point in any rental property expenses checklist.

When replacement relief or a limited company structure may not apply

Several exceptions limit the scope of allowable expenses for landlords. Furnished Holiday Lettings operate under distinct tax rules that treat certain costs differently compared to long-term residential properties. Replacement of domestic items relief may apply differently depending on the level of furnishing and the classification of the business.

Mixed-use properties

When a property is used partly for personal purposes, only the portion related to letting activity can be included under what expenses can I claim as a landlord. This requires precise apportionment. If a landlord uses a property for personal stays, only the proportionate rental business costs qualify as landlord allowable expenses, and all mixed-use items must be split correctly to avoid issues with HMRC landlord expenses.

Legislative changes and accounting methods

Legislation on finance costs has changed repeatedly in recent years. Landlords should remain aware of potential future reforms that could affect mortgage interest relief or other property income allowable expenses. Those using cash basis accounting may recognise rental property expenses differently compared to landlords using accrual basis accounting. Understanding the accounting method helps landlords stay compliant while maximising what a landlord can claim against tax across the year.

How to prepare a rental property expenses checklist

Creating a well-structured rental property expenses checklist gives landlords a consistent method for documenting allowable expenses for landlords. A simple spreadsheet can list each property with headings for date, supplier, category, description, amount, receipt reference and notes. Categories should match standard landlord expenses, such as repairs, utilities, insurance, professional fees, replacement relief, travel and finance costs.

Supporting documents and retention

All receipts, invoices and statements should be kept for at least the period HMRC may request evidence. This often includes tenancy agreements, bank statements, management reports and repair documentation. Detailed records help substantiate allowable expenses for rental income and confirm that every listed cost is valid.

Bank accounts and periodic reviews

Using a dedicated bank account or credit card for rental expenses helps prevent personal and business costs from mixing. Regular quarterly reviews ensure that all rental property expenses are captured, especially those that arise between tenancies. This improves accuracy when calculating landlord tax deductions and reduces the risk of omission when filing returns.

Conclusion

Understanding allowable expenses for landlords is crucial to minimising taxable income and ensuring compliance with HMRC’s landlord expenses rules. Every cost must relate wholly and exclusively to the rental business, and correct categorisation helps landlords maximise landlord tax deductions without risking disallowed claims. This applies across allowable property expenses, rental property expenses and property income allowable expenses, especially when managing multiple properties.

Keeping accurate records supports clearer calculations of allowable expenses for rental income. Separating personal and rental transactions, storing invoices and reviewing costs regularly is essential, especially as rules on finance costs and replacement of domestic items relief continue to change.

Landlords who track rental income and allowable expenses carefully and stay updated on what expenses they can claim as a landlord are better positioned at tax time. For tailored guidance or support with complex landlord expenses, readers can contact ARB for a consultation.

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