UK Landlord Allowable Expenses 2026/27 — What Can You Claim?

UK landlords normally pay Income Tax on the profit from letting property, rather than on every pound of rent received. The profit calculation starts with gross property income and subtracts allowable expenses. The difficult part is deciding which costs belong to the day-to-day property business, which are capital costs, which are covered by a separate relief and which cannot be claimed at all.

For 2026/27, common allowable expenses for residential property can include letting-agent fees, certain legal and professional fees, insurance, repairs and maintenance, utilities paid by the landlord, ground rent, service charges, Council Tax and direct letting costs such as advertising. HMRC says capital expenditure, such as buying a property or improving it beyond a repair, is not an allowable property-income expense. A replacement domestic item may qualify under separate rules.

Individual landlords also need to separate residential finance costs from ordinary expenses. Mortgage interest and certain other finance costs are not generally deducted in full from residential property profit; instead, the finance-cost restriction produces a basic-rate tax reduction under the relevant rules. The choice between claiming actual expenses and using the £1,000 property allowance must also be made carefully, because the allowance is not simply added to actual deductions.

What is an allowable property expense?

An allowable expense is a cost incurred in running the property business that meets HMRC's rules. It should have a clear connection to letting the property and should not be a private cost or a capital improvement. A landlord who pays a bill personally can still claim it where the cost belongs to the property business, but the records must identify the property, date, supplier and business purpose.

The expense should be allocated to the correct tax year. A bill paid in March may relate to work completed in February, while a prepaid insurance policy can cover more than one period. Keep the invoice and payment evidence and record the accounting treatment used. Do not claim the same expense against two properties or in two tax years.

Where a cost relates partly to a let property and partly to the landlord's own use, claim only the reasonable business proportion. A phone contract used for several purposes is not automatically a full property expense. The evidence should show the method used to apportion it and why the result is reasonable.

Which everyday costs can landlords claim?

GOV.UK lists several categories of ordinary residential property expenses. Depending on the facts, these can include:

• letting-agent and property-management fees;
• legal fees for a letting of a year or less or for renewing a lease for less than 50 years;
• accountant fees connected with the property business;
• buildings and contents insurance;
• maintenance and repairs;
• utilities such as gas, water and electricity where the landlord pays them;
• rent, ground rent and service charges;
• Council Tax paid by the landlord; and
• services such as cleaning or gardening, together with direct letting costs such as phone calls, stationery and advertising.

The list is not a permission to claim every invoice with one of those labels. A legal bill for buying the property is different from a legal bill for a short letting agreement. A service charge can include repairs and capital works that need to be separated. An accountant’s fee may cover both the property pages and private tax advice. Ask for a breakdown when an invoice covers multiple purposes.

Repairs versus improvements

Repairs restore an asset to its previous standard or replace a worn part with a broadly equivalent item. Improvements change the property into something better, larger, more durable or materially different. The distinction is based on the work and the property’s condition, not merely on whether the contractor writes “repair” on the invoice.

Replacing a broken boiler with a modern equivalent may be a repair if it restores the property’s function. Extending the heating system to add a new feature or substantially upgrading the property can include capital expenditure. Replacing a single damaged window may differ from replacing every window as part of a redesign. Record the original condition, scope of work, reason for the work and invoices.

Capital expenditure is not normally deducted from rental income. It may instead be relevant to the property’s capital gains calculation when the property is disposed of, subject to the capital-gains rules and whether the cost is reflected in the gain. Do not claim it as a revenue repair simply because paying it reduced your bank balance in the year.

If repair work follows a purchase, review the timing and condition evidence. Work that is necessary to make a newly acquired property fit for letting can require a careful capital-versus-revenue analysis. Keep the survey, purchase documents, contractor scope and before-and-after evidence.

What is replacement of domestic items relief?

HMRC says a landlord may claim relief for replacing a domestic item in a residential property where the conditions are met. Examples include beds, sofas, curtains, carpets, fridges, crockery and cutlery. The replacement must be for use by tenants, and the item being replaced must no longer be used in the property.

The relief is for a replacement, not for furnishing a property for the first time. The cost of an improvement is not automatically covered. Where the new item is more expensive or has a materially higher specification, the allowable amount can be limited by the replacement rule. Keep the receipt for the new item and evidence that the old item was disposed of or removed from use.

Do not claim a private household purchase merely because a tenant sometimes uses it. The item should belong to the let property and satisfy the residential-property conditions. If a landlord uses the item personally between tenancies, record the dates and consider whether an apportionment is needed.

Should I use the £1,000 property allowance?

GOV.UK says that if annual gross property income is more than £1,000, an individual can generally choose between the tax-free property allowance and deducting relevant actual expenses. The choice is not made by adding £1,000 to the actual expense total. The allowance is an alternative calculation method.

If actual allowable expenses are higher than £1,000, deducting them may produce the lower taxable profit. If actual expenses are lower, the property allowance may be simpler or more favourable, subject to the exclusions. Calculate both methods before filing. The comparison should use gross property income and the expenses that would actually qualify, not mortgage capital repayments or improvement costs.

The property allowance has restrictions. GOV.UK says it cannot be used where the property income is from a company or partnership connected to the taxpayer or their spouse/civil partner, and it cannot be used where the landlord claims the finance-cost tax reducer for residential property. It is also not available where a landlord deducts actual expenses from room-rental income instead of using the Rent a Room Scheme.

Keep the calculation showing why the selected method was chosen. Once the return is filed, changing the method may affect the property profit, loss and finance-cost treatment. Do not use the allowance automatically just because it is easier to describe.

How is residential mortgage interest treated?

For an individual landlord letting residential property, mortgage interest and certain other finance costs are subject to a restriction. HMRC explains that the costs are not deducted in full in calculating property profits; instead, the landlord receives a basic-rate tax reduction. The rule applies to interest on mortgages and loans, including loans used to buy furnishings, together with certain fees and incidental costs of obtaining or repaying finance.

Capital repayments are not interest. Paying down the mortgage may improve the landlord’s equity but is not the same as an allowable finance cost. A loan used partly for the property and partly for another purpose must be apportioned on a reasonable basis. Keep the lender’s annual interest certificate, loan agreement, drawdown evidence and calculations showing the use of the funds.

HMRC’s property-income guidance explains that the finance-cost reduction can be limited by property profits and adjusted total income. Unused finance costs may be carried forward under the rules. The finance-cost reduction can also interact with the property allowance choice, so do not claim the allowance and the reducer as though both were full deductions for the same year.

Companies can have different rules for interest on property loans. This guide focuses on individual landlords. If the property is owned by a company, trust or partnership, confirm the entity’s reporting treatment before using an individual landlord calculation.

What records should a landlord keep?

Keep a separate ledger for each property or property business. Record rent received, dates, deposit treatment, agent statements, invoices, bank payments, insurance, service charges, utilities, repairs and finance costs. For shared costs, record the apportionment method. For property-wide invoices, keep the detailed schedule rather than only the total bank transaction.

For repairs, preserve the contractor’s description, photographs where useful and evidence of the original condition. For replacements, record the old item and the new item. For legal and professional fees, ask for a description of the work. For finance costs, retain the lender certificate and identify whether the loan relates to residential, commercial or private use.

The records should support both the tax return and a later question about whether a cost was revenue or capital. A spreadsheet with a column called “tax deductible” is not enough if it does not contain the source document or explanation. Keep a note for costs excluded from the claim as well; this prevents the same invoice from being reconsidered without context.

How do losses fit into the calculation?

Actual expenses can reduce property profit and may create or increase a property loss. The treatment of a loss depends on the property business, the income type and the relevant reporting rules. Do not use the property allowance and actual expenses interchangeably when calculating a loss. Record the loss separately and check the applicable carry-forward or relief route.

Residential finance costs that are not used in the current year can have their own carried-forward treatment. This is different from a normal repair expense and different again from a capital loss on the future sale of the property. Label the type of loss or unused amount clearly in the working papers.

Where there are UK and overseas properties, keep separate property-income records and check whether foreign tax and double-tax relief issues arise. A foreign property may be part of the UK tax return but not follow the same local expense or currency documentation. Do not convert a foreign tax payment into a UK allowable expense without checking the relevant relief.

What if the property is empty?

A property can incur costs while empty between tenants. The question is whether the property remains part of the letting business and whether the cost is incurred for that business. Agent fees, insurance, utilities and repairs may need to be recorded during a genuine letting period, but private use, a decision to withdraw the property from letting or a major redevelopment can change the analysis.

Keep evidence of marketing, agent instructions, viewings, tenancy dates and the reason for the void. A short gap while seeking a tenant is different from a long period in which the landlord occupies the property or carries out a personal renovation. The facts should explain why the cost is connected to the continuing property business.

Frequently Asked Questions

This guide reflects HMRC and GOV.UK guidance available on 22 September 2026. Recheck the current property-income rules, scheme conditions and your entity structure before filing. It is general information, not personal tax advice.

Official sources

• GOV.UK — Renting out a property: paying tax
• GOV.UK — Tax-free allowances on property and trading income
• GOV.UK — Residential landlord finance cost relief
• HMRC Property Income Manual — residential finance costs
• GOV.UK — Income Tax when renting out a property: examples