If you rent out property in the UK, the tax bill can feel heavy, but you are entitled to deduct a range of allowable expenses before you pay a penny of income tax. This guide walks through every major category of deductible costs, explains what HMRC will and will not accept, and covers the mortgage interest restriction that trips up many landlords. Whether you own one buy-to-let or a small portfolio, getting your expenses right is the single most effective way to reduce your tax liability lawfully.
- How landlord tax works
- Allowable expenses you can deduct in full
- Mortgage interest and the finance cost restriction
- Repairs vs improvements: knowing the difference
- Replacement of domestic items relief
- Home office and administration costs
- Furnished holiday lets: different rules
- Making Tax Digital for landlords
- Record-keeping and self assessment
- Frequently asked questions
How landlord tax works
Rental income is taxable. HMRC treats it as a separate source of income, and you pay income tax on your net rental profit: that is, your total rental income minus your allowable expenses. In 2026/27, the income tax rates are 20% (basic rate), 40% (higher rate), and 45% (additional rate), with the personal allowance sitting at £12,570.
If your total rental income across all UK properties is £1,000 or less in the tax year, the property income allowance covers it in full and you do not need to report it. Above that threshold, you must complete a self assessment tax return and declare your rental profit after deducting allowable costs.
One important point: all your UK residential properties are pooled together for tax purposes. You cannot cherry-pick which property’s income or expenses you report. It all goes into a single calculation.
Allowable expenses you can deduct in full
HMRC allows a broad range of costs, provided they are incurred wholly and exclusively for the purpose of renting out the property. Below are the main categories.
Letting agent fees and management charges
If you use a letting agent to find tenants, collect rent, or manage the property on your behalf, their fees are fully deductible. This includes tenant-find fees, management percentages, and any renewal fees they charge.
Buildings and contents insurance
Landlord-specific insurance policies, covering the building, contents you own, and landlord liability, are an allowable expense. Standard home insurance policies are not sufficient for rental properties, and HMRC expects you to hold appropriate cover.
Ground rent and service charges
If your property is leasehold, ground rent and service charges paid to the freeholder or management company are deductible. This is particularly relevant for flat owners in managed blocks.
Council tax and utility bills
If you pay council tax or utility bills during void periods (when the property is empty between tenancies), those costs are allowable. If your tenants pay these bills directly, you cannot claim them.
Legal and professional fees
Solicitor fees for drawing up tenancy agreements, accountancy fees for preparing your rental accounts, and the cost of professional advice relating to your letting business are all deductible. Legal costs for renewing a lease of less than 50 years are also allowable. However, costs incurred in buying or selling a property are capital in nature and are not deductible against rental income. They may be relevant for capital gains tax instead.
Advertising and tenant-finding costs
Money spent advertising a vacant property, whether through online portals, local newspapers, or flyers, can be claimed.
Accountancy and bookkeeping costs
The cost of an accountant preparing your property accounts and tax return is fully deductible. Equally, if you use software or a bookkeeping service to track your rental income and expenditure, that cost is allowable.
Travel costs
Travel to your rental property for genuine business purposes, carrying out an inspection, meeting a contractor, or dealing with a maintenance issue, can be claimed. You can use HMRC’s approved mileage rate (check the latest HMRC guidance for the current rate) if you travel by car, or claim the actual cost of public transport. Commuting from home to a single property you consider your “base” does not qualify.
Cleaning and gardening
If you pay for the property to be cleaned between tenancies, or for ongoing garden maintenance where that is your responsibility under the tenancy agreement, those costs are deductible.
Mortgage interest and the finance cost restriction
This is the area that catches most landlords out. Since April 2020, residential landlords can no longer deduct mortgage interest (or other finance costs) directly from their rental income. Instead, you receive a basic rate tax credit worth 20% of your finance costs.
How the restriction works in practice
Suppose your rental income is £18,000 and your mortgage interest is £8,000. You no longer reduce your profit to £10,000. Instead, your taxable profit is the full £18,000, and then you claim a 20% tax credit on the £8,000 of mortgage interest, reducing your tax bill by £1,600.
For higher rate taxpayers, this change is significant. Previously, higher rate relief was worth 40p per £1 of interest. Now it is capped at 20p per £1. If you are in the higher rate band, the restriction effectively increases your tax liability on rental income.
Finance costs that fall within this restriction include mortgage interest, loan interest, and mortgage arrangement fees. The restriction applies to residential properties only: commercial property landlords are not affected.
Limited companies are not affected
If you hold property through a limited company, the mortgage interest restriction does not apply. The company deducts mortgage interest as a business expense in the normal way, and profits are subject to corporation tax at 19% (profits under £50,000) or 25% (profits over £250,000) in 2026/27. Whether incorporating is right for you depends on your individual circumstances. It is worth a proper conversation with an accountant before making that decision.
Repairs vs improvements: knowing the difference
This distinction matters more than most landlords realise. HMRC treats repairs and improvements very differently.
Repairs (allowable)
A repair restores something to its original condition. Examples include:
- Fixing a leaking roof
- Repairing a broken boiler (not replacing it with a significantly better model)
- Replastering a damaged wall
- Redecorating between tenancies
- Fixing broken gutters or windows
These costs are fully deductible against rental income in the year you incur them.
Improvements (not allowable against income)
An improvement goes beyond restoring the original condition. It upgrades or extends the property. Examples include converting a loft, adding an extension, or replacing a single-glazed window with double glazing for the first time. These are capital expenditure. You cannot deduct them against rental income, but they may reduce a capital gains tax bill when you eventually sell, so keep all receipts.
The grey area
Some costs sit in the middle. Replacing a kitchen like-for-like is a repair. Replacing it with a significantly superior kitchen with new layout and appliances is an improvement. If HMRC challenges your treatment, the question is whether the work restored the asset or created something better. When in doubt, document your reasoning carefully.
Replacement of domestic items relief
The old wear-and-tear allowance (a flat 10% of rents) was abolished years ago. In its place, landlords can claim replacement of domestic items relief. This applies to furnished and partly furnished properties.
You can deduct the cost of replacing items such as:
- Sofas, beds, and furniture
- Televisions and white goods (washing machines, fridges, etc.)
- Carpets and flooring
- Curtains and blinds
- Crockery and cutlery
The relief covers like-for-like replacement only. If you upgrade to a better model, you can only claim the equivalent cost of the original item. You also deduct any proceeds received from disposing of the old item. Crucially, you cannot claim for the initial purchase of furnished items when you first let the property, only replacements qualify.
Home office and administration costs
If you manage your rental properties yourself from home, dealing with correspondence, tenant calls, accounts, and so on, you may be able to claim a proportion of your home running costs. HMRC accepts a reasonable apportionment of costs such as phone bills, broadband, and stationery. Keep it proportionate and be ready to justify the calculation if asked.
Subscription costs for property management software, accounting software, or landlord association memberships are also allowable where they relate wholly to your letting activity.
Furnished holiday lets: different rules
Furnished holiday lets (FHLs) have historically been treated as a trade rather than an investment, which meant more generous tax treatment. However, the Government announced the abolition of the FHL regime from April 2025. From that date, FHL properties are taxed in the same way as other residential lets, including the mortgage interest restriction.
If you run a holiday let, check the latest HMRC guidance to confirm how your property is now classified, especially if it straddles the change. The pooling rules, finance cost restriction, and capital allowances position will all need reviewing.
Making Tax Digital for landlords
From April 2026, Making Tax Digital for Income Tax Self Assessment (MTD ITSA) becomes mandatory for self-employed individuals and landlords with gross income over £50,000. If your rental income (before expenses) exceeds that threshold, you will need to use MTD-compatible software and submit quarterly updates to HMRC rather than a single annual return.
The threshold drops to £30,000 from April 2027, and to £20,000 from April 2028. Even if you are not yet in scope, getting your records onto a digital platform now is sensible. It makes quarterly reporting far simpler when the obligation arrives.
Good record-keeping and the right software also make claiming expenses more straightforward. Every expense category discussed in this guide needs to be recorded, dated, and supported by a receipt or invoice.
Record-keeping and self assessment
HMRC requires you to keep records for at least five years after the 31 January filing deadline for the relevant tax year. For landlords, that means retaining:
- Rental statements from letting agents
- Bank statements showing rent received
- Invoices and receipts for every expense claimed
- Mortgage statements showing the interest element
- Records of any capital expenditure (for future capital gains calculations)
- Mileage logs if you claim travel costs
Your self assessment tax return must include a UK property pages (SA105) where you report your rental income and allowable expenses. If your rental income is above £2,500 after expenses, or above £10,000 before expenses, HMRC requires you to register for self assessment and file annually.
Getting the figures right matters. Under-claiming expenses costs you money. Over-claiming risks an HMRC enquiry and penalties. Working with an accountant who understands property income, or using management accounts to track your position throughout the year: means you stay on top of both.
The property income pages of your return also ask about the property income allowance, losses brought forward from previous years, and the finance cost tax credit. It is easy to make errors without proper guidance, particularly when you have multiple properties or mixed-use assets.
Getting your expenses right does not require complex planning. It requires discipline, decent records, and an accurate tax return. If you are unsure whether a cost qualifies, the rule of thumb is simple: was it spent wholly and exclusively to generate rental income? If yes, it is likely allowable. If it also benefited you personally, it probably is not. When in doubt, speak to an accountant before you claim it.
Frequently asked questions
Can I claim mortgage payments as a landlord expense?
No. You cannot deduct the capital repayment element of your mortgage at all. For the interest element, the full deduction against rental income was removed from April 2020. You now receive a basic rate tax credit (20%) on your finance costs instead. Higher rate taxpayers receive less relief than they did previously as a result.
Can I claim for decorating and repainting between tenancies?
Yes. Redecorating to restore the property to a lettable condition is treated as a repair and is fully deductible against rental income. Keep your invoices and note that the work relates to a rental property.
Are legal fees for evicting a tenant tax deductible?
Generally, yes. Legal costs incurred in the course of your letting business, including eviction proceedings, are allowable expenses. Legal costs connected with buying or selling the property are not.
What happens if my rental expenses exceed my rental income?
You make a rental loss. You cannot offset a residential property rental loss against other income (such as your salary), but you can carry it forward and set it against future rental profits from the same property business. Keep a record of your carried-forward losses on each self assessment return.
Can I claim a new kitchen or bathroom as an expense?
It depends. A like-for-like replacement of a worn-out kitchen or bathroom is a repair and is deductible. A substantial upgrade that goes beyond restoring the original standard is an improvement and counts as capital expenditure, which you cannot deduct from rental income. You should keep receipts either way, as capital costs may reduce your capital gains tax bill on eventual sale.
Do I need an accountant as a landlord?
You are not legally required to use an accountant, but the rules around the finance cost restriction, replacement of domestic items relief, and the repairs vs improvements distinction are complex enough that errors are common. An accountant’s fee is itself a deductible expense, and professional advice often saves more in tax than it costs. If you are approaching the Making Tax Digital threshold, getting set up properly now will save significant time later.
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