As an individual landlord you can deduct day-to-day running costs of the letting, such as repairs, agent fees, insurance and accountancy, from your rent. You cannot deduct capital spending such as the purchase price or improvements, and mortgage interest on homes is not deducted at all: it gives a tax credit at 20% for 2026/27, rising to 22% from 6 April 2027. The line between repair and improvement usually makes the biggest difference to the bill.
The two tests every expense must pass
Wholly and exclusively. The cost must be incurred only for the letting. A family holiday at the property, described as an inspection, fails. Where a cost is partly private, such as a car or phone, you can claim an identifiable business share, worked out on a fair basis.
Revenue, not capital. Revenue costs keep the property as it was. Capital costs buy, add to or improve it. Only revenue costs come off the rent.
Repairs or improvements?
A repair puts something back to its previous condition, even if you use modern materials. Replacing a broken boiler, re-fixing storm-damaged tiles or redecorating between tenants are repairs. HMRC accepts that swapping single glazing for double glazing is a repair today, because double glazing is now the normal standard rather than an upgrade.
An improvement changes what the property is or can do: an extension, a loft conversion, a kitchen where there was none, or a much higher specification than before. Three points catch people out:
- No "notional repair". If you choose to improve rather than repair, you cannot claim the amount a plain repair would have cost. The whole cost is capital.
- Mixed jobs can be split. Where a builder does genuine repairs and an extension at the same time, a fair apportionment (ideally itemised on the invoice) lets you claim the repair part.
- Run-down purchases. Work to make a newly bought property fit to let, especially where the price was reduced for its condition, is usually capital.
Furniture and appliances. Replacement of domestic items relief lets you deduct the cost of replacing a sofa, bed, fridge, carpet or kitchenware in a let dwelling, plus delivery, fitting and disposal of the old item, less anything you got for it. If the new item is a clear upgrade, relief is capped at the cost of a like-for-like replacement. The first set of furniture in a property gets no relief, and the relief is not available where you use Rent a Room relief.
Furnished holiday lets. The special regime ended on 6 April 2025. Former holiday lets are now taxed like other residential lets, so the interest restriction applies and replacement relief is available instead of capital allowances on new spending.
What you can and cannot claim
| Cost | Against rent? | Where it goes instead |
|---|---|---|
| Repairs, maintenance, redecoration between lets | Allowable | Deducted from rent |
| Letting and management fees, tenant-finding costs | Allowable | Deducted from rent |
| Landlord insurance, ground rent, service charges | Allowable | Deducted from rent |
| Council tax, utilities, water paid by you (e.g. void periods) | Allowable | Deducted from rent |
| Accountancy, safety certificates, landlord association fees | Allowable | Deducted from rent |
| Legal fees for a let of a year or less, or renewing a lease under 50 years | Allowable | Deducted from rent |
| Travel to the property for letting purposes | Allowable (55p a mile for the first 10,000 miles, or actual costs) | Deducted from rent |
| Mortgage and loan interest, arrangement fees (residential) | Not deducted | 20% tax credit (22% from 2027/28) |
| Purchase price, stamp duty, legal fees on purchase | Not allowable | Capital gains tax base cost |
| Extensions and other improvements | Not allowable | Capital gains tax base cost, if still reflected in the property on sale |
| First furnishing of a property | Not allowable | No relief |
| Mortgage capital repayments, your own time, private use | Not allowable | No relief |
Costs incurred before the first letting, such as advertising or repairs, can be claimed if they were spent within seven years before the letting began and would have been allowable once it had started. You can pay a spouse or relative for genuine work at a commercial rate, but nothing for your own time.
Finance costs: a credit, not a deduction
For residential lets owned personally, mortgage interest, loan arrangement fees and interest on loans for furnishings are left out of the profit calculation. Instead you get a tax reduction at the basic rate, 20% for 2026/27, limited broadly to the lowest of your finance costs, your property profit and your income above the personal allowance. Unused amounts carry forward. From 6 April 2027 the credit rises to 22%, in step with the new property income rates explained in our April 2027 guide. Companies are not restricted: they deduct interest in full, which is one reason some landlords consider incorporation.
Simpler options: the £1,000 allowance, Rent a Room and the cash basis
Property allowance. Instead of actual costs you can deduct a flat £1,000 from gross rents. It suits very small lettings only, and you cannot combine it with the finance cost credit.
Rent a Room. Letting furnished rooms in your own home is tax-free up to £7,500 a year (£3,750 if the income is shared). Above that, you choose between paying tax on the excess over £7,500 or claiming actual expenses.
Cash basis. Individuals with property receipts of £150,000 or less use the cash basis automatically unless they opt out. Rent counts when received and costs when paid, so timing a payment before or after 5 April moves the deduction between tax years. Capital spending on ordinary residential lets is still blocked.
Records and Making Tax Digital
Keep invoices, bank statements and mileage logs for at least five years after the 31 January filing deadline, and keep notes explaining why a large job was a repair. Making Tax Digital already applies where property and self-employment income exceeded £50,000, and from 6 April 2027 it extends to those over £30,000, with quarterly digital updates. See our quarterly update guide.
What to do now
- Review this year's large invoices and split repair from improvement before you file.
- Keep a capital register of improvements and purchase costs for capital gains tax.
- Check whether the £1,000 allowance or actual costs gives the lower bill.
- Time discretionary, genuinely allowable spending around 6 April 2027, when relief rises to 22% or 42%.
- Run your figures through our property tax calculators and diarise the 31 January 2027 deadline.
Find out more about our property tax work and how we help landlords. If you would like a Chartered Tax Advisor to review your rental accounts, book a consultation.
This article is general information about UK tax, based on the law and HMRC practice at the date shown above. It is not advice, and reading it does not make you our client. Tax rules change and their effect depends on your circumstances, so please speak to us before acting on it.