What Expenses Can Landlords Claim Against Tax?

What does hmrc’s wholly and exclusively test mean in practice?

Every deduction starts with one question: was the cost incurred wholly and exclusively for the property business? If part of the spending served a private purpose, HMRC can refuse all of it unless you can identify a definite business share.

The test hmrc applies

HMRC’s guidance on the wholly and exclusively rule says your stated purpose is relevant but not decisive. Inspectors read the invoices, agreements and notes behind the spending instead.

A replacement sofa bought for a furnished let passes the test. The same sofa moved into your own living room when the tenancy ends does not.

Splitting a dual purpose cost

Where a cost has an identifiable business part, you claim that part. Run 20% of your annual mileage on property visits and 20% of the running costs are allowable.

Keep the working that produced the percentage, not just the answer. A mileage log or a room count is what turns an apportionment into an accepted one.

Why all your properties count as one business

Every UK property you let is part of a single UK property business. A loss on one flat is set against the profit on another in the same tax year automatically.

If the pooled result is still a loss, it carries forward against the first available property profits. It cannot be set against your salary, which is why portfolio landlords watch the pooled figure rather than each property in isolation.

Which running costs can you deduct in full?

The day to day costs of letting come off your rental income in the year you incur them. Agent fees, insurance, repairs, safety certificates, void council tax, advertising, referencing and accountancy all qualify.

The allowable and disallowable list

The list below follows HMRC’s guidance on working out your rental income, with the items landlords most often get wrong marked in the right hand column.

Where insurance premiums and IPT sit

Premiums for landlord buildings insurance, landlord contents cover and property owners‘ liability are deductible in full. So is the Insurance Premium Tax charged at the standard rate of 12%.

The same applies to the optional sections. Rent guarantee, loss of rent and home emergency cover are all business costs of letting.

Specialist cover is treated no differently, so an HMO policy or the block premium recharged through the service charge on a leasehold flat both qualify.

Cover on the home you live in is not deductible, which is the practical reason the difference between landlord and home insurance matters at tax time as well as at claim time.

Where you claim on a policy, deduct the excess and anything the insurer did not pay, not the full repair bill. Our guide to how an insurance excess works explains the figure you will be netting off.

Compliance costs you can claim every year

The annual gas safety check carried out by a registered gas engineer and the five-yearly report from a qualified electrician are both revenue costs.

Smoke and carbon monoxide alarm replacements, legionella risk assessments and EPC assessments sit in the same category. Budget £250 to £450 a year for the full set on a single let.

Where is the line between a repair and an improvement?

A repair restores what was already there and comes off this year’s profit. An improvement makes the property better than it was, so it only counts when you sell.

HMRC’s entirety test

HMRC treats a repair as the restoration of an asset by replacing subsidiary parts of the whole. The whole asset is normally the house or flat, not the roof or the wiring.

That is why replacing storm-damaged tiles is a repair while stripping the roof to add a storey is capital. HMRC’s guidance on when repairs become capital also confirms that upgrades driven by advances in technology stay allowable where the function and character are broadly the same.

The examples that catch landlords out

The dilapidated purchase trap

Buying a property cheaply because it is unusable and then putting it right is not a repair. HMRC treats that work as part of the cost of acquiring the asset.

The same applies where a change of materials produces a significant improvement, because then the whole bill is capital. Sudden one-off damage is different again, and is usually met by accidental damage cover rather than by your tax return.

How does replacement of domestic items relief work?

You can deduct the cost of replacing a sofa, bed, carpet, curtain, fridge or cooker in a let home, less anything you get for the old one. The first time you buy those items is never deductible.

The four conditions

HMRC’s replacement of domestic items guidance sets four conditions, and all of them have to be met.

• You carry on a property business letting a dwelling-house.
• An old domestic item provided for the tenant is replaced with a new one.
• The spending is capital in nature and passes the wholly and exclusively test.
• No capital allowances have been claimed on the replacement item.

What counts as a domestic item

Moveable furniture, furnishings, household appliances and kitchenware all count. Beds, sofas, curtains, carpets, fridges, washing machines, crockery and cutlery are the usual claims.

Fixtures do not count. Baths, toilets, boilers and fitted units are part of the building, so they go through the repairs rules instead.

Like for like, upgrades and part exchange

A brand new item is not automatically an improvement on a worn one of the same standard. Where you do upgrade, relief is capped at what the nearest equivalent would have cost.

Sale or scrap proceeds from the old item reduce your deduction. On a part exchange you claim the cash you actually paid, not the trade-in value.

Rent-a-Room claims are excluded from the relief. Furnished holiday lets used to be excluded too, but the regime was repealed from 6 April 2025, so a short-term let is now treated like any other residential letting for this purpose.

Why is mortgage interest a tax reduction rather than a deduction?

Since 6 April 2020 an individual landlord gets no deduction for mortgage interest. You get a basic rate tax reduction worth 20% of the lowest of your finance costs, your property profits, or your income above the personal allowance.

How the reduction is worked out

The three-way comparison is the part most guides skip, and it is set out in HMRC’s finance cost restriction guidance. Anything the comparison strips out is not lost, because unrelieved finance costs carry forward to later years.

Finance costs are wider than the monthly interest. Mortgage arrangement fees, broker fees and interest on a loan taken out to fund a deposit all fall inside the restriction.

A worked example on a £12,000 rent

The higher rate landlord above pays £1,000 more tax on the same cash profit. A basic rate taxpayer often ends up level, unless the extra £5,000 of taxable profit pushes them into the higher band.

Companies and the restructuring question

A UK company still deducts interest in full, which is why some landlords hold buy-to-let property through one. Moving an existing property in is a sale to a connected party, so stamp duty and capital gains tax usually apply.

Run the numbers over five years before you move anything. Company mortgage rates, annual accounts and extraction of profit often erase the interest saving on a small portfolio.

Can you claim costs from before your first tenant moved in?

Yes, within limits. Spending incurred up to seven years before the business starts is treated as though you paid it on the first day of letting.

The seven year rule

Section 57 of the Income Tax (Trading and Other Income) Act 2005 gives the relief, and HMRC’s commencement guidance sets the conditions. The cost must fall within the seven years, must not be allowable anywhere else, and must be the kind of cost you could have claimed once the business was running.

Advertising for a first tenant, referencing, insurance taken out before the tenancy starts and pre-letting cleaning all qualify. Work to make a derelict property habitable does not, because it is capital.

First letting costs that are capital

This is where landlords lose money quietly. Legal fees, agent fees and surveyor fees connected with a first letting for more than one year are capital, not revenue.

Renewals, replacement tenancies and lets of a year or less are deductible in the normal way. Lease renewal costs stay allowable as long as the lease runs for under 50 years.

What can you claim for travel, home working and professional fees?

Mileage to inspections and repairs, a fair share of the cost of running the business from home, and the professional fees that belong to letting rather than to buying.

Mileage at hmrc’s fixed rates

For 2026-27 the approved mileage rates are 55p a mile for the first 10,000 business miles, 25p after that, and 24p for a motorcycle. They rose from 45p in the 2025-26 tax year.

You can use the fixed rate or claim a business proportion of actual running costs, but not both for the same vehicle. Once you choose the fixed rate for a vehicle, stay with it for as long as you own it.

One catch is worth knowing. Where a letting agent manages the property, HMRC treats the agent’s office as the base of the business, so your own trips out are often not allowable.

Running the business from home

There is no statutory flat rate for a property business, so the simplified expenses figures used by sole traders do not apply. HMRC expects the extra costs you actually incur, or a fair proportion of the fixed costs of a room used for the business.

A sensible method is rooms used, then hours used. Two hours a week at a desk in a four-bedroom house does not support a quarter of your heating bill.

Which professional fees are capital

Accountancy for the rental accounts, landlord association subscriptions, rent arbitration and the cost of evicting a tenant in order to re-let are all revenue.

Conveyancing and survey fees on a purchase or sale are capital and belong in your capital gains tax calculation. Possession costs are the one area where legal expenses cover often pays the bill before your tax return ever sees it.

Should you use the £1,000 property allowance instead?

If your gross rents are £1,000 or less, the property allowance covers them and there is usually nothing to report. Above that you can deduct £1,000 instead of your actual expenses, which only wins when your real costs are lower.

Full relief and partial relief

Full relief applies where property income for the year is £1,000 or less. Partial relief lets you elect to deduct the £1,000 from gross rents rather than claiming expenses.

On £8,000 of rent with £600 of costs, the allowance leaves £7,000 taxable instead of £7,400. On the same rent with £3,000 of costs, claiming expenses is better by £2,000.

When the allowance is the wrong choice

You cannot claim the allowance and your expenses in the same year, and the election is made property business by property business. A loss-making year is almost always better handled through actual expenses.

The allowance also cannot create or increase a loss. Anyone letting a room in their own home should compare it against Rent-a-Room relief, which is worth £7,500.

Who cannot use it

You cannot use the property allowance for income received from a connected party, such as rent from your own company or from a partnership you belong to. Nor can you combine it with the finance cost tax reduction on the same income.

What records do you need to keep, and for how long?

Keep invoices, receipts, bank statements and agent statements for at least five years after the 31 January filing deadline for that tax year. Digital copies are accepted.

The retention clock

Records for the 2025-26 tax year are filed by 31 January 2027 and must be kept until at least 31 January 2032. HMRC can go back further where a return is careless or deliberately wrong.

Register for Self Assessment by 5 October following the tax year in which the rent first arrived. First rent in September 2025 means registering by 5 October 2026.

Making tax digital from april 2026

Landlords with qualifying income above £50,000 have kept digital records and filed quarterly updates since 6 April 2026. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028.

Qualifying income is measured on gross rents and trading turnover before expenses, so a heavily mortgaged landlord can be inside the rules while barely breaking even. Move to software early rather than in the quarter it bites.

What good records look like

• One bank account per property business, never your personal current account.
• A repairs file with a photograph, the invoice and the reason for the work.
• A mileage log with date, property, purpose and miles for every journey.
• Insurance schedules and renewal notices, which show the gross premium and IPT.

This guide is general information rather than tax advice. Your own position depends on your income, your ownership structure and your other reliefs, so check it with an accountant before you file.