What Can Landlords Claim Against Tax?

/Published:11th June 2026/inExpenses, Landlords, Making Tax Digital
Accounting Wise - What Can Landlords Claim Against Tax

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If you let out property in the UK, the difference between a comfortable return and a disappointing one often comes down to one thing: knowing exactly what you can and cannot claim against your rental income. Every pound of legitimate expense you fail to record is a pound you pay tax on unnecessarily. Yet many landlords either miss valid deductions or, worse, claim costs that HMRC will later disallow.

This post looks at how some landlord tax deductions work in 2026, who they apply to, the rules that catch people out, and the practical steps you can take to keep more of your rental profit while staying firmly on the right side of His Majesty’s Revenue and Customs.

Who this applies to

These rules apply to anyone earning income from letting UK residential property as an individual, including:

  • Buy-to-let landlords with one property or a large portfolio
  • Accidental landlords letting a former home
  • Landlords letting rooms, flats, or houses on standard residential tenancies
  • Joint owners splitting rental profits
  • Former furnished holiday let owners, now treated as ordinary residential lets following the abolition of the FHL regime on 6 April 2025

If you hold property through a limited company, the rules differ in important ways, particularly around mortgage interest. We cover that distinction below, but most of this guide is written for individual landlords reporting through Self Assessment.

What counts as an allowable expense?

HMRC allows you to deduct costs that are incurred wholly and exclusively for the purpose of renting out your property. In plain terms, the expense has to relate to the running of your rental business, not to your personal life or to improving the property’s underlying value.

The most commonly claimed deductions include:

  • Repairs and maintenance such as fixing a boiler, repainting, replacing broken windows, or mending a leaking roof (but not improvements, which we explain below)
  • Letting agent and management fees
  • Accountancy fees for preparing your rental accounts and Self Assessment return
  • Buildings and contents insurance, plus specialist landlord or rent guarantee policies
  • Ground rent and service charges on leasehold properties
  • Council tax and utility bills where you, rather than the tenant, pay them
  • Legal and professional fees for tenancy agreements and renewals (though not for the initial purchase)
  • Advertising for new tenants
  • Direct property costs such as cleaning, gardening, and gas safety certificates

You can find HMRC’s official list of allowable property expenses in its guidance on working out your rental income.

Repairs versus improvements: the distinction that trips landlords up

This is one of the most misunderstood areas of landlord tax, and getting it wrong can lead to a disallowed claim or a missed one.

A repair restores something to its original condition and is deductible against your rental income in the year you pay for it. An improvement enhances the property beyond its previous state and is treated as capital expenditure, which you generally cannot deduct from rental income. Instead, you may be able to offset it against any Capital Gains Tax bill when you eventually sell.

Replacing a worn-out kitchen with a similar standard one is usually a repair. Ripping out a basic kitchen and installing a high-specification one is an improvement. The test is whether you have restored or upgraded.

Modern equivalents matter here. Replacing single-glazed windows with double glazing is normally accepted as a repair, because double glazing is now the standard like-for-like replacement, even though it is technically an upgrade. HMRC explains the boundary in its Property Income Manual (PIM2030).

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Mortgage interest and Section 24

This is the single biggest change in landlord taxation over the past decade, and it still catches people out. Individual landlords can no longer deduct mortgage interest from rental income before calculating tax.

Instead, under the rules commonly known as Section 24, you receive a basic-rate tax credit worth 20% of your finance costs. This covers mortgage interest, interest on loans used to buy or improve the property, and certain arrangement fees. Importantly, only the interest portion qualifies. Capital repayments never do.

For a basic-rate taxpayer, the effect is broadly neutral. For higher and additional-rate taxpayers, it means you no longer get full relief at your marginal rate, which can push effective tax rates up considerably. You report finance costs in the residential finance costs section of the SA105 supplementary pages, and HMRC applies the 20% reduction automatically.

Limited company landlords are treated differently. A company can generally deduct mortgage interest in full as a business expense before calculating Corporation Tax, which is one reason many landlords weigh up incorporation. That decision involves Stamp Duty, Capital Gains Tax, and ongoing administration costs, so it is rarely a simple win and is worth modelling properly with an accountant before acting.

Replacement of Domestic Items Relief

If you provide furniture, white goods, carpets, curtains, or kitchenware for your tenants, you can claim Replacement of Domestic Items Relief (RDIR) when you replace those items. This relief took over from the old wear and tear allowance in April 2016.

A few points are worth knowing:

  • You can only claim on the replacement of an item, not the initial cost of furnishing a property for the first time
  • The deduction is capped at the cost of a like-for-like replacement, so upgrading from a budget appliance to a premium one only gives relief up to the equivalent standard model
  • You can add the incidental costs of delivery, installation, and disposing of the old item
  • Any money you receive for the old item, including trade-in value, reduces your claim
  • The property does not have to be let furnished to qualify

The full conditions are set out in HMRC’s Property Income Manual (PIM3210).

The £1,000 property allowance

If your gross rental income is modest, the property allowance may be simpler and more generous than itemising expenses. It works in three ways:

  • If your total gross property income is £1,000 or less, it is fully exempt and you usually do not need to report it
  • If your income is above £1,000, you can elect to deduct the £1,000 allowance instead of your actual expenses
  • If your actual expenses exceed £1,000, you are better off claiming the real costs instead

You cannot claim both the allowance and your actual expenses in the same year, so the rule of thumb is to claim whichever gives the bigger deduction. More detail is on the GOV.UK property and trading allowances page.

How to claim, and the deadlines that matter

Most individual landlords report rental income through Self Assessment, completing the SA105 UK property pages alongside the main return. The key dates are:

  • 5 October: deadline to register for Self Assessment if you have new rental income to declare for the previous tax year
  • 31 October: deadline for paper tax returns
  • 31 January: deadline for online returns and for paying any tax due

You should keep records of income and expenses for at least five years after the 31 January submission deadline for the relevant tax year. HMRC can ask to see receipts, invoices, and bank statements, and without them a claimed expense may be disallowed.

Making Tax Digital for Income Tax

From 6 April 2026, landlords with qualifying income over £50,000 must keep digital records and submit quarterly updates to HMRC using compatible software under Making Tax Digital for Income Tax. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. If you are approaching these figures, it is vital towards digital record-keeping now rather than scrambling later. The official guidance is on GOV.UK.

Penalties for getting it wrong

HMRC applies automatic penalties for late filing, starting at £100 and increasing the longer a return is outstanding, with further daily penalties and interest on unpaid tax. Inaccurate returns carry their own penalties, and these are higher where HMRC believes an error was careless or deliberate rather than an innocent mistake.

Crucially, HMRC has access to data from letting agents, the Land Registry, and tenancy deposit schemes, so undeclared rental income is increasingly easy to spot. If you have rental income you have not declared, the Let Property Campaign offers a route to bring your affairs up to date on better terms than waiting to be caught.

Practical tips to maximise your deductions

  • Open a dedicated bank account for your rental property so income and expenses are easy to separate and evidence
  • Photograph and file every receipt digitally as you go, rather than reconstructing a year of spending in January
  • Record finance costs separately, since they receive the 20% credit rather than a straight deduction
  • Keep capital expenditure records even where you cannot claim now, because improvements can reduce a future Capital Gains Tax bill
  • Review jointly owned properties, as splitting income with a lower-earning spouse can be efficient, though it has legal and tax consequences worth advice first
  • Time larger works thoughtfully around your tax year where the property’s letting status allows it

Final thoughts on Tax Reduction and Expenses for Landlords

Landlord tax deductions are not about finding clever loopholes. They are about understanding the rules, keeping clean records, and claiming everything you are genuinely entitled to while avoiding the costs HMRC will reject. The Section 24 finance cost rules, the repairs-versus-improvements distinction, and the arrival of Making Tax Digital for Landlords all make accurate record-keeping more valuable than ever.

Get the basics right and you will pay the correct tax, reduce the risk of an enquiry, and keep more of what your property earns. If your portfolio is growing or your tax position feels complicated, a specialist accountant can usually save you far more than they cost.

Accounting Wise works with landlords across the UK to keep their property tax efficient and fully compliant. To talk through your situation, request a call back today!

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Landlord Tax Reductions FAQ

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No. The purchase price and associated buying costs are capital, not revenue, so they reduce your Capital Gains Tax when you sell rather than your annual income tax.

Not the full payment. The capital repayment element is never deductible, and since the Section 24 changes, individual landlords receive only a 20% tax credit on the interest portion rather than deducting it from income.

No. You cannot pay yourself a wage for managing your own rental property and deduct it. You can, however, claim genuine third-party management and letting fees.

Yes. You still report it, and rental losses can usually be carried forward to offset against future rental profits from the same property business.

Glossary of Key Landlord Tax Terms

Allowable Expense – A cost incurred wholly and exclusively for running your rental business that you can deduct from rental income to reduce your tax bill (e.g. repairs, insurance, letting agent fees).
Capital Expenditure – Money spent improving a property beyond its original condition. Not deductible from rental income, but may reduce Capital Gains Tax when you sell.
Revenue Expenditure – Day-to-day running costs of the property, such as repairs and maintenance, which are deductible against rental income.
Section 24 – The rules restricting individual landlords to a 20% basic-rate tax credit on mortgage interest and other finance costs, rather than deducting them in full from rental income.
Finance Costs – Mortgage interest, loan interest, and certain arrangement fees. Only the interest portion qualifies for the 20% credit; capital repayments never do.
Replacement of Domestic Items Relief (RDIR) – Relief allowing landlords to deduct the cost of replacing furniture, white goods, carpets, and similar items provided for tenants, capped at a like-for-like equivalent.
Property Allowance – A £1,000 tax-free allowance on gross property income. You can claim this instead of actual expenses, but not both in the same year.
Self Assessment – The HMRC system through which individual landlords report rental income and expenses and pay any tax due.
SA105 – The UK property supplementary pages of the Self Assessment tax return, where rental income, expenses, and finance costs are reported.
Repairs vs Improvements – The distinction between restoring something to its original condition (a deductible repair) and enhancing it beyond that (a capital improvement).
Like-for-Like – The test used in RDIR claims: relief is limited to the cost of an equivalent standard replacement, so upgrades above that standard are not fully deductible.
Rental Loss – When allowable expenses exceed rental income. Losses can usually be carried forward to offset future profits from the same property business.
Capital Gains Tax (CGT) – Tax payable on the profit when you sell a property that has risen in value. Capital improvements and certain costs can reduce the gain.
Gross Property Income – Total rental income before any expenses or allowances are deducted.
MTD for Income Tax (Making Tax Digital) – An HMRC initiative requiring landlords above set income thresholds to keep digital records and submit quarterly updates using compatible software.
HMRC – His Majesty's Revenue and Customs, the UK government body responsible for collecting taxes.
Let Property Campaign – An HMRC scheme allowing landlords with undeclared rental income to bring their tax affairs up to date on more favourable terms.

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