Allowable expenses for landlords: what you can and can't claim

Get your expenses right and you pay tax only on what you actually earn from letting. Get them wrong and you either leave money on the table, or claim something you shouldn’t and invite a problem later.

And the biggest expense most landlords have — the mortgage — no longer works the way people assume. So it’s worth getting the whole picture straight.

This is general guidance for individual landlords in the UK, not tax advice — the rules and rates depend on your circumstances, so check with an accountant for yours.

What counts as an allowable expense

The test HMRC applies is whether a cost was incurred wholly and exclusively for the purpose of renting the property out. If it was, and it’s a day-to-day running cost rather than a capital one, you can usually deduct it from your rental income before tax.

That “day-to-day rather than capital” distinction is the one that trips people up, and we’ll come back to it.

The expenses you can usually claim

For a residential let, the common allowable expenses are:

• Letting and management fees — agent commission, tenant-find fees, inventory costs
• Repairs and maintenance — putting things back to working order (more on this below)
• Landlord insurance — buildings, contents, liability
• Ground rent and service charges — for leasehold flats
• Utilities and council tax — where you pay them, such as during voids or in an HMO
• Legal and professional fees — accountancy, and legal costs for renewing a tenancy (not the initial purchase)
• Direct costs of letting — advertising for tenants, phone calls, stationery, postage
• Travel — journeys made wholly for the rental business, such as inspections
• Replacement of domestic items — see below

Mortgage interest: the rule that changed

This is the big one. Individual landlords can no longer deduct mortgage interest as an expense. Since the 2020-21 tax year, the old deduction is gone, replaced by a basic-rate tax credit under what’s commonly called Section 24.

In practice: instead of taking the interest off your rental income, you work out the tax on the full rental profit, then reduce your tax bill by 20% of the finance costs. For a basic-rate taxpayer the maths roughly nets out — though adding the full rent to your taxable income can nudge some landlords into the higher-rate band. For a higher-rate landlord it means paying tax on income that’s really gone to the lender, which is why some have moved properties into a company, where interest is still a deductible cost.

Repairs vs improvements: the line that matters

This is the distinction that decides whether a cost is allowable at all. A repair restores something to its original condition — and it’s allowable. An improvement upgrades the property beyond its original state — and it’s capital, so it can’t come off your rental income (though it may reduce capital gains tax when you sell).

The everyday version: replace a broken boiler with a like-for-like one and it’s a repair. Rip out the kitchen and put in a bigger, higher-spec one, or add an extension, and that’s an improvement.

There’s a related relief worth knowing: replacement of domestic items relief. Since April 2016 (when the old 10% wear-and-tear allowance was scrapped) you can claim the cost of replacing a domestic item — a sofa, a fridge, carpets — with a like-for-like equivalent. The catch is it’s only the replacement; the cost of furnishing a property for the first time isn’t allowable.

What you can’t claim

• The capital repayment part of your mortgage (only the interest gets the 20% credit)
• The cost of improvements against rental income
• The initial cost of furniture and appliances (only their replacement)
• Your own time or labour
• Anything for personal use, or the private-use portion of a mixed cost

Keeping it straight — and MTD-ready

However you handle expenses, you need to record them, with the figures and the evidence behind them — and from April 2026, Making Tax Digital means landlords over the threshold keep digital records and report quarterly.

That’s the case for getting off spreadsheets: ZuroProp records rent and expenses as they happen, keeps the documents attached, and pushes the figures through to the accounting software HMRC recognises — Xero, FreeAgent, Sage or QuickBooks — so the numbers are categorised and ready, not reconstructed in a panic each January.

Common questions

Can I deduct my mortgage payments?

Not as a straight expense. The capital repayment isn’t deductible at all, and the interest no longer comes off your income — instead you get a basic-rate (20%) tax credit on it.

Is a new bathroom or kitchen an allowable expense?

It depends. A like-for-like replacement of a worn-out kitchen or bathroom is usually a repair, so allowable. Upgrading to a significantly better one is an improvement — capital, not an income expense.

What’s the £1,000 property allowance?

The first £1,000 of property income is tax-free. You can claim that allowance instead of your actual expenses — which only makes sense if your real costs are under £1,000, and you can’t do both.

Do I need an accountant to claim expenses?

No, but it can pay for itself. ZuroProp keeps your figures clean and sends them to your accountant’s software if you have one — so whether you self-file or not, the records are in order.