What Expenses Can You Claim on the SA105?
Allowable expenses are one of the most important considerations for landlords because they can reduce the amount of rental profit subject to Income Tax.
Generally, an expense must be incurred wholly and exclusively for the purposes of your property business to qualify for a deduction, although special rules apply to some costs.
Common Allowable Property Expenses
- Letting agent fees: Charges for finding tenants, collecting rent and managing the property.
- Repairs and maintenance: Costs of maintaining the property, such as fixing leaks, repairing boilers or replacing damaged fixtures on a like-for-like basis.
- Landlord insurance: Eligible buildings, contents and public liability insurance premiums.
- Professional fees: Accountancy fees, and legal fees for lets of a year or less or for renewing a lease of less than 50 years.
- Utility bills: Gas, electricity and water charges paid by the landlord for the rental business.
- Council Tax: Council Tax paid by the landlord for the property business, such as during qualifying vacant periods.
- Ground rent and service charges: Qualifying charges associated with leasehold properties.
- Services you pay for: Costs such as cleaning or gardening for the property.
- Advertising and other direct costs: Marketing a property to prospective tenants, plus items like stationery and phone calls directly connected to the letting.
Not every property-related expense is automatically deductible. The nature and purpose of the expenditure matter.
Repairs Versus Improvements
One area that frequently causes confusion is the difference between repairs and capital improvements.
Repairs generally maintain a property in its existing condition. Improvements, on the other hand, may enhance the property beyond its previous standard.
For example:
- Repair: Replacing a broken kitchen cupboard door with a similar replacement.
- Repair: Fixing a leaking roof or replacing worn-out components.
- Potential capital improvement: Building an extension or converting a loft into an additional bedroom.
- Potential capital improvement: Significantly upgrading a property beyond its original standard.
Capital improvements are generally not deductible against rental income, although qualifying expenditure may be relevant when calculating Capital Gains Tax on a future sale.
Modern replacement materials do not necessarily make a repair a capital improvement. HMRC considers the work undertaken and whether it represents a repair or an enhancement.
Replacing Domestic Items
Landlords may also qualify for relief when replacing certain domestic items in residential rental properties.
Examples include:
- Beds and mattresses.
- Sofas and other furniture.
- Fridges and washing machines.
- Carpets, curtains and similar furnishings.
- Crockery and cutlery.
Broadly, relief is based on the cost of a like-for-like replacement, together with certain incidental costs, less any proceeds received from disposing of the old item. The new item must be bought for use by tenants in a residential property, and the old item must no longer be used there.
Additional expenditure for an upgrade beyond a reasonable modern equivalent is generally excluded, and the initial purchase of furniture for a property does not normally qualify for replacement of domestic items relief.
Further information is available in HMRC’s guidance on working out rental income and expenses.
Furnished Holiday Lets
The special furnished holiday lettings (FHL) tax regime ended on 6 April 2025 for Income Tax. From the 2025/26 tax year, income from furnished holiday lets is generally reported as ordinary UK property income, so the benefits that came with FHL status, such as capital allowances on furnishings and separate loss treatment, no longer apply to new claims. If you are still submitting a return for 2024/25 or earlier, the old rules may still be relevant.
How Does Mortgage Interest Work on the SA105?
Mortgage interest is an area where landlords need to take particular care.
Individual landlords letting residential property generally cannot deduct mortgage interest and certain other finance costs directly from rental income when calculating taxable profits.
Instead, qualifying finance costs may attract a tax reduction calculated at the basic rate of Income Tax, which is 20% for the 2025/26 tax year.
This is commonly referred to as the residential property finance cost restriction.
Example of Mortgage Interest Tax Relief
Suppose you receive £15,000 in annual rent and have £3,000 of allowable running expenses, excluding mortgage interest.
Your property profit before finance cost relief would be:
£15,000 – £3,000 = £12,000
If you also paid £4,000 in qualifying mortgage interest, you would generally report the £12,000 property profit and separately record the qualifying finance costs.
Assuming the full amount qualifies for relief and none of the statutory limits restricts it, the tax reduction for 2025/26 would be:
£4,000 × 20% = £800
Importantly, the relief is not necessarily £800 in every case. It is subject to limits based on qualifying finance costs, property business profits and adjusted total income, with unused qualifying costs potentially carried forward.
The rules differ for some property businesses, including companies and certain commercial property lettings. HMRC provides more detail in its residential landlord finance cost guidance.
Understanding the £1,000 Property Income Allowance
The property income allowance is a tax relief designed to simplify reporting for individuals receiving relatively small amounts of property income.
For qualifying income, the allowance is £1,000 per tax year. If you own a property jointly, each owner is eligible for their own £1,000 allowance against their share of the gross rental income.
If your total qualifying gross property income is £1,000 or less, it is normally exempt from Income Tax and you do not need to tell HMRC, subject to exclusions and special rules.
If your gross income exceeds £1,000, you may be able to choose between:
- Deducting your actual allowable property expenses.
- Claiming the £1,000 property income allowance instead of those expenses.
You cannot generally claim both the allowance and actual expenses against the same property income, and the allowance cannot be used to create a loss.
Example: Choosing Between Expenses and the Allowance
Imagine you receive £4,000 in rental income during the tax year.
If your allowable expenses total £600, claiming the £1,000 property income allowance could reduce your taxable property profit to £3,000 rather than £3,400.
However, if your actual allowable expenses total £1,800, claiming those expenses would generally be more beneficial, leaving a taxable profit of £2,200.
When You Cannot Use the Property Allowance
The property income allowance is not available in every situation. You cannot use it if:
- You claim the tax reduction for residential finance costs, such as mortgage interest.
- You use the Rent a Room Scheme for income from letting a room in your own home, or deduct expenses from that income instead.
- The income comes from a company you, or someone connected to you, owns or controls, from a partnership where you or a connected person is a partner, or from your employer or the employer of your spouse or civil partner.
For landlords with a mortgage, this means the allowance is often not an option. You can read more on GOV.UK.
How to Complete the SA105 Form
Completing the SA105 involves gathering your rental records, calculating your income and expenses, and entering the appropriate figures into your Self Assessment return.
Step 1: Gather Your Rental Records
Before starting, collect your financial records for the relevant tax year, which runs from 6 April to 5 April.
You should have access to:
- Rental statements and bank records.
- Tenancy agreements.
- Letting agent statements.
- Invoices and receipts for property expenses.
- Mortgage interest statements.
- Records of property repairs and maintenance.
- Details of any previous property losses.
Step 2: Calculate Your Rental Income
Add together the income received or earned during the tax year, depending on the accounting basis used.
Most individual landlords use the cash basis, which is the default method for unincorporated property businesses. Under this method, income is generally recorded when received and expenses when paid.
Some landlords choose the traditional accruals basis, under which income and expenses are recognised when earned or incurred rather than when money changes hands.
It is important to use the correct basis consistently and understand how any change affects your figures.
Step 3: Calculate Your Allowable Expenses
Review your expenditure and identify costs that qualify as deductions.
Separate ordinary running costs from residential finance costs, capital expenditure and other items requiring special treatment.
Step 4: Calculate Your Property Profit or Loss
Deduct your allowable expenses from your rental income to calculate your property business profit or loss, applying any relevant adjustments.
If you own multiple UK rental properties, their results are generally combined and treated as a single UK property business.
Step 5: Enter Your Figures Into Self Assessment
If you complete your tax return online, you will normally answer questions about your sources of income before being presented with the relevant UK property sections.
Alternatively, you can use the paper SA105 supplementary pages with your SA100 return.
Enter your figures carefully, particularly where separate boxes apply to residential finance costs, losses and tax reliefs.
Step 6: Check and Submit Your Return
Before submitting, check that your income, expenses and other figures reconcile with your records.
Make sure you have included other taxable income, such as employment earnings, dividends and self-employment profits, where applicable.
Your property income is considered alongside your other taxable income when HMRC calculates your overall Income Tax liability.
SA105 Example: Calculating Rental Property Profits
Let’s look at a practical example involving a landlord who owns one residential rental property.
During the 2025/26 tax year, the landlord receives £1,100 per month in rent.
| Income or expense | Annual amount |
|---|
| Gross rental income | £13,200 |
| Letting agent fees | £1,320 |
| Landlord insurance | £300 |
| Repairs and maintenance | £850 |
| Accountancy fees | £250 |
| Total allowable running expenses | £2,720 |
| Taxable property profit before finance cost relief | £10,480 |
In this example, the landlord would generally report a property profit of £10,480 before any relevant loss relief or further adjustments.
If the landlord also paid £3,000 in qualifying residential mortgage interest, they may be entitled to a basic-rate tax reduction of up to £600 for 2025/26, subject to the applicable limits.
The amount of Income Tax ultimately payable depends on their other taxable income, personal allowances, applicable tax bands and any other reliefs. This is why two landlords earning the same rental profit can end up paying different amounts of tax.
What Is Changing for Landlords From April 2027?
The 2025/26 return you are preparing now uses the current rates. However, the Autumn Budget 2025 announced significant changes that will affect landlords from the 2027/28 tax year.
New Property Income Tax Rates
From 6 April 2027, individuals will pay Income Tax on property income at separate property rates, each two percentage points higher than the current rates:
| Band | Current rate | Property rate from April 2027 |
|---|
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
As a simple illustration, every £10,000 of property profit taxed at the basic rate would cost £2,200 rather than £2,000. Your actual position will depend on your other income and the bands it falls into.
The new rates are set out for England, Wales and Northern Ireland. Arrangements in Scotland and Wales are subject to devolved decisions, so check the latest HMRC guidance if you let property there.
Finance Cost Relief Rises to 22%
The tax reduction for residential finance costs is also due to be calculated at the new property basic rate of 22% from April 2027. Using the earlier example, £4,000 of qualifying mortgage interest would give a maximum reduction of £880 rather than £800, subject to the usual limits.
The £1,000 property income allowance and the Rent a Room Scheme are due to continue.
Limited Company or Personal Ownership?
Because the personal property rates are rising while a company can still deduct mortgage interest in full, some landlords are reviewing how they hold property. Moving an existing portfolio into a company can trigger Capital Gains Tax and Stamp Duty Land Tax, and extracting profits from a company is taxed separately (dividend tax rates also rose from April 2026), so take advice before making any change.
What Happens If Your Rental Property Makes a Loss?
Not every property generates a profit every year.
Unexpected repairs, periods without tenants or other qualifying costs can result in a property business loss.
In most cases, qualifying losses from a UK property business can be carried forward and offset against future profits from that same UK property business. Because your lettings are treated as a single business, a loss on one property can also be offset against profits from your other properties in the same year.
For example, if your property business makes a £2,000 allowable loss one year and a £6,000 profit the following year, you may be able to use the carried-forward loss to reduce the following year’s taxable property profit to £4,000.
Property losses cannot generally be offset against unrelated employment income or other types of income, although limited exceptions exist.
Keeping accurate records of losses is important, particularly where they are carried forward over several tax years.
SA105 Deadlines for the 2025/26 Tax Year
The SA105 is submitted as part of your Self Assessment return, so the usual Self Assessment deadlines apply.
For the tax year running from 6 April 2025 to 5 April 2026, the key deadlines are:
| Deadline | Requirement |
|---|
| 5 October 2026 | Register for Self Assessment if you need to complete a return for the first time. |
| 31 October 2026 | Submit your paper Self Assessment tax return. |
| 31 January 2027 | Submit your online Self Assessment return. |
| 31 January 2027 | Pay any outstanding 2025/26 Self Assessment balancing payment and, where applicable, your first 2026/27 payment on account. |
| 31 July 2027 | Pay your second 2026/27 payment on account, if required. |
From November 2026, the paper filing deadline has passed, but the standard online filing deadline of 31 January 2027 is still ahead of you.
If you missed the registration or paper filing deadline, you should address the position promptly rather than waiting until January.
HMRC publishes the current requirements on its Self Assessment deadlines page.
Have You Missed Rental Income in Previous Years?
If you have not declared rental income in earlier tax years, you can come forward through HMRC’s Let Property Campaign. Penalties are generally lower when you disclose the income yourself than when HMRC finds it first. It is worth speaking to an accountant before you start.
What Are the Penalties for Filing Your SA105 Late?
Because the SA105 forms part of your Self Assessment return, failing to submit the return on time can result in penalties.
Under the standard Self Assessment late-filing rules, penalties can include:
- One day late: An initial £100 penalty, even if there is no tax to pay.
- More than three months late: Additional daily penalties of £10 per day for up to 90 days, potentially totalling £900.
- More than six months late: A further penalty of £300 or 5% of the tax due, whichever is greater.
- More than twelve months late: Another penalty of £300 or 5% of the tax due, whichever is greater, with higher penalties possible in certain circumstances.
Late payment of tax can also lead to interest and separate penalties.
Where the standard late-payment penalty rules apply, penalties may arise at 30 days, six months and twelve months after the payment deadline.
HMRC may cancel penalties where you have a valid reasonable excuse, but you should not assume that an appeal will automatically be successful.
More information is available from HMRC’s Self Assessment penalties guidance.
SA105 and Making Tax Digital for Income Tax
Making Tax Digital for Income Tax is changing how many landlords report their income to HMRC. Whether it applies to you depends on your qualifying income, which is your gross income from self-employment and property combined, before expenses.
| Qualifying income over | Based on tax year | You must use MTD from |
|---|
| £50,000 | 2024/25 | 6 April 2026 (now in force) |
| £30,000 | 2025/26 | 6 April 2027 |
| £20,000 | 2026/27 | 6 April 2028 |
The thresholds relate to combined gross income from property and self-employment, not salary, dividends or the profit remaining after expenses.
The return you are filing now matters. HMRC uses your 2025/26 Self Assessment return to decide whether you must join from April 2027. If your gross property and self-employment income for 2025/26 was over £30,000, you should expect to be required to join, so it is worth preparing now rather than waiting for a letter. HMRC may write to you, but it remains your responsibility to check whether the rules apply.
Under Making Tax Digital, affected landlords generally need to:
- Maintain digital records of their property income and expenses.
- Use compatible software to meet HMRC’s requirements.
- Submit quarterly updates of income and expenses.
- Complete the required year-end tax reporting process.
You must still submit a Self Assessment return for each tax year before you start using Making Tax Digital. Landlords below the thresholds will generally continue using the existing Self Assessment system until the rules apply to them, unless they choose to join voluntarily. Some people, such as those who are digitally excluded, may qualify for an exemption.
You can check whether and when you need to join using HMRC’s guidance on Making Tax Digital for Income Tax.
Do You Need an SA105 If You Rent Out a Room?
If you rent out a furnished room in your main home, you may qualify for the Rent a Room Scheme.
This scheme allows you to earn up to £7,500 per tax year tax-free from qualifying furnished accommodation in your home. The limit is halved to £3,750 if you share the income with someone else.
If your income is within the threshold, the exemption applies automatically and you do not need to do anything.
If your income exceeds the threshold, you must complete a tax return. You can then either opt into the scheme and claim the tax-free amount, or opt out and record your actual income and expenses on the property pages of your return. The better option depends on your circumstances.
Read more in the official Rent a Room Scheme guidance.
Common SA105 Mistakes Landlords Should Avoid
Even relatively straightforward property tax returns can contain errors that lead to unexpected tax bills or HMRC enquiries.
1. Forgetting to Declare All Rental Income
Landlords sometimes overlook additional receipts, irregular rental payments or income from a property that was only let for part of the year.
Keep a complete record of payments received and reconcile them against bank statements and letting agent reports.
2. Claiming Capital Improvements as Repairs
Not all building work qualifies as a deductible repair.
Keep detailed invoices showing the nature of the work, particularly where a project includes both repairs and improvements.
3. Deducting Residential Mortgage Interest Incorrectly
For individual residential landlords, qualifying finance costs are generally dealt with through a basic-rate tax reduction rather than being deducted directly from rental profits.
Using the wrong treatment can produce an incorrect tax calculation.
4. Claiming the Property Allowance and Finance Cost Relief Together
The £1,000 property income allowance cannot be used if you claim the finance cost tax reduction. Check which route gives you the better result before you file.
5. Missing Allowable Expenses
Smaller costs, such as insurance, agent fees, replacement items and professional expenses, can add up over a tax year.
Failing to record them may mean paying more tax than necessary.
6. Using the Wrong Accounting Basis
Confusing cash basis accounting with accruals accounting can result in income or expenses being reported in the wrong tax year.
Make sure you understand which method applies to your property business.
7. Forgetting Previous Property Losses
Allowable losses from earlier years may reduce your current property profits.
Keep a record of losses brought forward and ensure they are correctly included in your return.
Practical Tax Tips for UK Landlords
A little organisation throughout the year can make completing your property tax return considerably easier.
- Use a separate bank account: Keeping rental income and property expenses separate from personal spending makes reconciliation easier.
- Maintain digital records: Record income and expenditure as transactions occur rather than trying to reconstruct the figures at year-end.
- Keep supporting documents: Retain invoices, receipts, statements and other evidence for the period required by HMRC.
- Review your expenses regularly: Check that you are claiming eligible costs without including personal or capital expenditure incorrectly.
- Plan for your tax bill: Set money aside from rental profits to cover Income Tax and any payments on account, and allow for the higher property rates from April 2027.
- Check your Making Tax Digital position: Monitor your combined gross property and self-employment income to establish when digital reporting becomes mandatory for you.
- Speak to an accountant: Professional advice can be particularly valuable if you own multiple properties, have significant finance costs or are considering purchasing through a company.
HMRC generally requires Self Assessment records to be retained for at least five years after the 31 January submission deadline for the relevant tax year, although longer periods may apply in some circumstances.
How Accounting Wise Can Help With Your Property Tax Return
Managing rental properties involves more than collecting rent and keeping tenants happy. You also need to understand your tax obligations, maintain accurate financial records and make sure your returns are completed correctly.
At Accounting Wise, we help UK landlords manage their property accounting and Self Assessment responsibilities without the unnecessary complications.
Whether you have one rental property or a growing portfolio, we can help you calculate your rental profits, identify allowable expenses, prepare your tax return and understand the tax implications of your property income.
We can also help you prepare for Making Tax Digital and the April 2027 changes to property income tax, and understand how changes to your property activities could affect your tax position.
If you’re unsure how to complete your SA105, or simply want the reassurance that everything has been handled correctly, our team is here to help.
Get in touch with Accounting Wise to discuss your property income and Self Assessment requirements.
Final Thoughts
The SA105 form is an important part of Self Assessment for individuals earning taxable income from UK property.
Understanding what needs to be declared, which expenses are allowable and how mortgage interest relief works can make a real difference to the accuracy of your return and the amount of tax you pay.
With Making Tax Digital introducing additional reporting requirements for many landlords and higher property tax rates arriving in April 2027, keeping accurate records and staying on top of your obligations is becoming increasingly important.
By maintaining organised records, reviewing your tax position throughout the year and seeking professional advice when needed, you can make managing your property income much more straightforward.
And if you’d rather leave the calculations, paperwork and HMRC deadlines to someone else, Accounting Wise can take care of your property tax return while you focus on managing your investments.
This guide is for general information only and does not constitute personal tax advice. Tax rules change, so check current HMRC guidance or speak to a qualified adviser about your own circumstances.
