Landlord Allowable Expenses: What You Can and Cannot Claim
RealYield Team
Property Analyst
An allowable expense is one you paid wholly and exclusively to run your letting business, such as a repair, landlord insurance or a letting agent's fee. Get that test right and most of your return follows easily. Get it wrong, and you either overclaim and risk an HMRC enquiry, or underclaim and hand over more tax than you owe.
This is the single rule HMRC applies to every cost you put through a rental property return: wholly and exclusively for the purposes of the letting business. Spend on the property itself, and it is usually allowable or at least arguable. Spend on something personal, or on improving the property rather than maintaining it, and it is not.
The wholly and exclusively test
If a cost would not have arisen without the letting business, and it was not for anything else at the same time, it passes the test. In practice, that covers a long list of ordinary running costs:
- Letting agent and management fees, including tenant-finding and renewal fees
- General maintenance and repairs, such as a plumber's bill or repainting between tenancies
- Landlord buildings and contents insurance, plus public liability cover
- Ground rent and service charges on a leasehold flat
- Accountancy fees for preparing the property accounts
- Advertising costs for finding a new tenant
- Utility bills, council tax and water rates where you pay them rather than the tenant
- Gardeners' or cleaners' wages if you employ them for the property
- Legal fees for a let of a year or less, or for renewing a lease of under 50 years
- The business proportion of vehicle running costs, including mileage, for visiting the property
Where a property is let at a reduced rent, for example to a relative, HMRC only allows expenses up to the amount of rent actually received for that let.
Source: GOV.UK, income tax when you let property, allowable and disallowable expenses [verified 5 November 2026]
Revenue versus capital: the test that catches people out
HMRC splits spending on a let property into two categories, and only one of them reduces your rental income tax.
Frequently Asked Questions
What expenses can a landlord claim against rental income?
Anything paid wholly and exclusively for running the letting business. That covers letting agent and management fees, general maintenance and repairs, landlord insurance, ground rent and service charges, accountancy fees, advertising for tenants, and any utility bills you pay directly rather than the tenant. Ground rent and service charges on a leasehold property are allowable. Mortgage interest is treated differently under Section 24 rather than as a straightforward expense.
What is the difference between a repair and an improvement for tax purposes?
A repair restores something to the condition it was already in, such as fixing a leaking roof or replacing a broken boiler with an equivalent one. That is a revenue expense, deductible in the year you pay it. An improvement adds something that was not there before or upgrades it well beyond its original state, such as adding an extension or installing central heating where there was none. HMRC treats that as capital expenditure. It is not deductible against rental income, though it can reduce a capital gains tax bill when you eventually sell.
Can I claim mortgage interest as an allowable expense?
Not as a straightforward deduction. Since April 2020, Section 24 has restricted individual landlords to a basic rate tax credit on residential mortgage interest and other finance costs, currently 20%, rather than deducting them from rental income before tax. Mortgage capital repayments get no relief at all under any system. Limited companies are not affected and can still deduct finance costs in full.
What is replacement of domestic items relief?
It lets you deduct the cost of replacing a domestic item, such as a sofa, fridge, bed or carpet, in a let property, provided the old item is genuinely gone and the new one is a like-for-like replacement. If you upgrade to something noticeably better, such as swapping a sofa for a sofa bed, you can only claim the cost of an equivalent replacement, not the full upgrade. The relief covers replacements only. The initial cost of furnishing a property for the first time is not deductible, and furnished holiday lets are excluded.
Should I claim the property allowance instead of actual expenses?
The £1,000 a year property allowance makes the first £1,000 of rental income tax-free with no expense records needed. But if you claim it, you cannot also deduct your actual expenses on top. For most mortgaged landlords with real repairs, insurance and agent fees to claim, actual expenses add up to far more than £1,000, so the allowance only tends to help landlords with very low-cost lettings or very low rental income.
What can't landlords claim against rental income at all?
Capital improvements, the capital repayment portion of a mortgage, legal and other costs of buying the property or arranging a long lease, your own clothing or travel to a non-work meeting, and any cost that is not wholly and exclusively for the letting business, such as a personal phone bill. Interest on borrowing above the value the property had when you started letting it is also restricted.
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