Filing your landlord tax return can feel overwhelming especially when it comes to understanding what expenses you can legally claim against your rental income. HMRC allows landlords to deduct certain costs from their rental profits which can significantly reduce the amount of Income Tax owed. However not all expenses are allowable and claiming for the wrong things can lead to penalties. In this guide we break down what UK landlords can and cannot claim as tax deductible costs.

What Landlords Can Claim as Tax Deductible

These are the main allowable expenses you can claim when completing your Self Assessment tax return.

1. Mortgage Interest

You can no longer deduct full mortgage interest from your rental income. However landlords can still receive a basic rate tax credit worth twenty percent of their mortgage interest payments. This applies to residential properties not commercial ones.

2. Letting Agent Fees

If you use a letting agent to manage your property their fees are tax deductible. This includes tenant find services management fees and renewal fees.

3. Property Maintenance and Repairs

You can claim for repairs needed to maintain the property in its current condition. This includes fixing leaks repairing broken windows replacing faulty wiring and redecorating between tenancies. It does not include improvements or renovations.

4. Council Tax and Utility Bills

If you the landlord are responsible for paying council tax gas electricity or water bills then these costs are allowable expenses.

5. Buildings and Contents Insurance

The cost of insuring your rental property and any contents you provide for tenants such as furniture or appliances is a tax deductible expense.

6. Service Charges and Ground Rent

If you own a leasehold property and are required to pay ground rent or service charges these can be claimed as allowable expenses.

7. Accountancy Fees

Fees paid to an accountant for preparing your landlord tax return or giving financial advice related to your rental business can be claimed.

8. Advertising for Tenants

Costs of marketing the property including online adverts printed flyers or signage are deductible.

9. Travel Costs

You can claim mileage or public transport costs for travelling to and from your rental property for business purposes such as inspections maintenance or dealing with tenant issues.

10. Replacement of Domestic Items

If you replace items such as beds sofas white goods or curtains in a furnished property you can claim for the cost of the replacement item not the upgrade under the Replacement of Domestic Items Relief.

What Landlords Cannot Claim as Tax Deductible

These are some of the most common expenses that are not allowable and should not be included in your tax return.

1. Capital Improvements

Any works that enhance the value of the property or increase its lifespan such as building an extension installing a new kitchen from scratch or adding a conservatory are considered capital costs. These cannot be deducted from rental profits but may be considered when calculating Capital Gains Tax when you sell the property.

2. Personal Expenses

You cannot claim for any costs that are not directly related to the rental property such as your own phone bill unless you use it specifically for managing the property.

3. Mortgage Capital Repayments

Only the interest on your mortgage may qualify for tax relief through the tax credit system. Repayments of the capital loan itself are not allowable expenses.

4. Initial Purchase Costs

Legal fees stamp duty and survey costs related to buying the property cannot be deducted from your rental income. These are capital costs.

5. Private Use Proportion

If you rent out part of your home or live in part of the property you must only claim the proportion of expenses that relate to the rental use. HMRC requires a fair and reasonable apportionment.

Understanding what you can and cannot claim is essential for staying compliant with HMRC and for maximising the profitability of your rental property. Always keep detailed records and receipts for all income and expenses and consult a qualified tax adviser if you are unsure about a specific cost.

By knowing the rules and staying organised you can ensure your tax return is accurate and avoid any costly mistakes.