If you rent out residential property in the UK, the income you receive is subject to Income Tax. You must report it on a Self Assessment tax return if your gross property income exceeds £1,000 per year (the property allowance). However, you are entitled to deduct allowable expenses from your rental income before calculating the tax you owe — and many landlords leave money on the table by not claiming everything they are entitled to.
Allowable expenses: the basics
HMRC allows you to deduct expenses that are incurred “wholly and exclusively” for the purpose of renting out your property. These fall into two broad categories:
- Revenue expenses — day-to-day costs of letting the property (fully deductible)
- Capital expenses — improvements that increase the property's value (not deductible as expenses, but may be eligible for Capital Gains Tax relief when you sell)
The distinction between repairs (revenue, deductible) and improvements (capital, not deductible) is one of the most important concepts in UK property tax, and we cover it in detail below.
5 commonly missed expenses
1. Letting agent fees and management costs
If you use a letting agent to manage your property, find tenants, or handle day-to-day issues, their fees are fully deductible. This includes:
- Monthly management fees (typically 8-15% of rent)
- Tenant-finding fees
- Inventory check costs
- Rent collection charges
Many landlords claim the management percentage but forget about one-off fees like tenant-finding or inventory charges. These are all allowable.
2. Landlord insurance premiums
All insurance premiums directly related to your rental property are deductible:
- Buildings insurance
- Landlord contents insurance
- Landlord liability insurance
- Rent guarantee insurance
- Legal expenses insurance (if landlord-specific)
If your buildings insurance covers both your home and a rental property (e.g., in a converted building), you can claim the proportion attributable to the rental property.
3. Replacement domestic items (furniture, appliances, etc.)
Under the Replacement Domestic Items Relief, you can claim the cost of replacing furnishings, appliances, and other domestic items in a let property. This covers:
- Sofas, beds, tables, chairs
- Curtains, carpets, blinds
- Fridges, washing machines, cookers
- Crockery, cutlery, bed linen
Replacement, not initial cost
You can only claim the cost of a replacement item, not the initial purchase. If you buy a new fridge for an unfurnished property for the first time, it is not deductible. If you replace a broken fridge that was already in the property, the replacement cost is deductible. If the replacement is of a higher standard than the original, you can only claim the cost of an equivalent replacement.
4. Travel costs for property management
If you travel to your rental property for legitimate management purposes, the travel costs are deductible. This includes journeys to:
- Carry out inspections
- Meet tradespeople for repairs
- Collect rent (if done in person)
- Show the property to prospective tenants
- Purchase materials for the property
If you drive, you can claim 45p per mile for the first 10,000 business miles and 25p per mile thereafter. Alternatively, you can claim actual vehicle running costs (fuel, insurance, servicing) proportionate to business use — but you cannot use both methods.
5. Professional and legal fees
Several types of professional fees are deductible but often overlooked:
- Accountancy fees for preparing rental accounts and your tax return
- Legal fees for renewing a lease (but not for granting a new lease of more than one year or for buying/selling the property)
- Legal fees for evicting a non-paying tenant
- Safety certificate costs — gas safety, EPC, electrical safety, Legionella risk assessments
- Subscription costs for landlord associations (e.g., NRLA membership)
What you cannot claim
Understanding what is not deductible is just as important. The key distinction is between repairs and improvements:
| Deductible (Repair) | Not deductible (Improvement) |
|---|---|
| Replacing a broken boiler with a like-for-like model | Upgrading from a standard boiler to a smart heating system |
| Repainting walls | Knocking down a wall to create an open-plan layout |
| Fixing a leaking roof | Adding a loft conversion |
| Replacing single-glazed windows with double glazing (if like-for-like replacement) | Adding new windows to a previously windowless room |
| Rewiring to modern standards | Installing a completely new electrical circuit for an extension |
| Replastering damaged walls | Adding a new bathroom |
The improvement trap
If you buy a run-down property and renovate it before letting it for the first time, none of the renovation costs are deductible as revenue expenses — they are treated as capital expenditure (part of your acquisition cost for CGT purposes). Repairs are only deductible when the property was already in a lettable condition and the work restores it to its previous state.
Section 24: Mortgage interest restriction
One of the biggest changes to landlord taxation in recent years is the Section 24 restriction on mortgage interest deductions. Prior to April 2020, individual landlords could deduct mortgage interest in full as an expense. Now, the rules are very different:
- Mortgage interest and other finance costs are no longer deductible as an expense from rental income
- Instead, you receive a tax credit equal to 20% of your finance costs
- This means basic-rate taxpayers are broadly unaffected (they still get 20% relief)
- However, higher-rate (40%) and additional-rate (45%) taxpayers lose out significantly — they effectively only get 20% relief on costs that previously attracted 40% or 45% relief
Example
Suppose you earn £30,000 in rental income and pay £15,000 in mortgage interest. Under the old rules, your taxable profit would be £15,000. Under Section 24, your taxable profit is £30,000 (minus your other allowable expenses but not mortgage interest). You then receive a 20% tax credit on the £15,000 interest (£3,000). For a higher-rate taxpayer, this can mean paying significantly more tax than before.
Section 24 applies to individual landlords only. If you hold property through a limited company, mortgage interest remains a fully deductible business expense. This is one of the reasons many landlords have considered incorporating, though there are other tax implications (Stamp Duty, Capital Gains Tax on transfer) that make this complex.
Record-keeping requirements
HMRC requires you to keep records of all rental income and expenses for at least 5 years after the 31 January filing deadline for the relevant tax year. Good records include:
- Rent received — bank statements showing rental payments
- Invoices and receipts for all expenses claimed
- Mortgage statements showing interest paid
- Letting agent statements
- Mileage logs if claiming travel costs
- Tenancy agreements and correspondence
TaxGo tip
Upload your mortgage statements, agent invoices, and receipts to TaxGo throughout the year. Our system categorises expenses automatically and calculates Section 24 relief correctly — so you can focus on managing your property, not wrangling spreadsheets.
Getting it right
Claiming all your legitimate expenses can make a significant difference to your tax bill. A landlord with £20,000 in rental income who claims £6,000 in allowable expenses saves £1,200 in tax at the basic rate, or £2,400 at the higher rate. Over several years, missed expenses can add up to thousands of pounds in unnecessary tax.
The key is to keep good records, understand the difference between repairs and improvements, and claim everything you are entitled to. If you are unsure whether a particular cost qualifies, the safest approach is to keep the receipt and check — it is much easier to decide not to claim an expense than to recreate records you have thrown away.