Under Making Tax Digital, landlords need to keep digital records of income and expenses and submit regular updates to HMRC. Understanding which expenses you can claim is an important part of staying compliant.
Claiming allowable expenses reduces the taxable profit from your rental income, which means you pay less tax. Understanding what you can and cannot claim is one of the most valuable things a landlord can know. Under Making Tax Digital, keeping clear digital records of expenses becomes even more important, your records must be available to support the figures you submit in your quarterly updates.
Allowable expenses are costs that are wholly and exclusively incurred in the running of your property rental business. You deduct these from your gross rental income to arrive at your taxable profit. The rules are set by HMRC and apply whether you are filing under the current Self Assessment system or under Making Tax Digital.
Costs of keeping the property in its current condition are allowable. This includes repairing a broken boiler, fixing a leaking roof, repainting internal walls, replacing a broken window, and similar maintenance work.
Important: There is a distinction between repairs (allowable) and improvements (not immediately allowable as a revenue expense). Replacing a wooden window with a double-glazed unit is generally treated as an improvement and may only be deductible against capital gains when you eventually sell.
Landlord insurance, buildings insurance, contents insurance for furnished lets, and rent guarantee insurance are all allowable. The premium must relate to the property you are letting.
If you use a letting agent to find tenants, collect rent, or manage the property on your behalf, their fees are fully deductible. This includes one-off fees for finding a tenant as well as ongoing management charges.
For leasehold properties, service charges paid to the freeholder or management company are allowable. Ground rent is also deductible.
Fees paid to an accountant for preparing your rental accounts or tax return are allowable. Legal fees incurred in recovering unpaid rent or evicting a tenant may also be deductible, depending on the nature of the dispute.
Travel costs incurred specifically to visit your property for rental purposes, such as inspections, meeting contractors, or carrying out repairs, are allowable. You cannot claim travel from home to the property if the property is your main place of work. Keep records of each journey, the purpose, and the distance.
Costs of advertising the property for let, including listing fees on rental platforms, signage, or photography for listings, are allowable.
The cost of having the property cleaned between tenants or the garden maintained during a tenancy is allowable where you as the landlord are responsible for this.
If the property is unoccupied between tenancies and you are paying utilities during that period, those costs are generally allowable as they relate to the rental business.
Mortgage interest and other finance costs on residential property are not deducted from rental income in the same way as other expenses. Instead, landlords receive a 20% tax credit on finance costs. This is sometimes called the finance cost restriction or Section 24.
Under MTD, finance costs are entered separately in the relevant field, your software will ask for them specifically. You do not include them in your general expenses total.
If your total rental income is £1,000 or less, you can use the property income allowance instead of deducting actual expenses. This exempts the income from tax entirely without the need to keep detailed expense records. If your income is above £1,000, you cannot use this allowance, you must deduct actual expenses instead.