What expenses can landlords claim against tax?

Renting out property involves having to pay for a wide range of associated costs and expenses. Some are relatively minor, while others are rather more expensive. These outgoings can certainly mount up over a year and take a large chunk out of your rental income.

Fortunately, for tax purposes, you can claim many such costs as allowable expenses, which you can deduct from your rental income as a landlord to help reduce your tax bill.

What is a legitimate landlord expense?

For an expense to be allowable, so that you can legitimately deduct it from your rental income as a landlord, it must result “wholly and exclusively” from renting out your property.

You can’t claim for personal costs. So, for example, you can’t claim for the total cost of a carpet cleaner that you use for your own home as well as your rental property. If you only use it for cleaning carpets in your rental property or properties, you can claim all of the cost as a legitimate allowable expense.

If you use something for personal and business reasons, a mobile phone being a common example, you can only claim allowable expenses for the proportion of costs created by making calls relating to being a landlord and renting out your property.

You claim for allowable expenses by detailing them within your Self Assessment tax return, together with your rental income and other sources of taxable income. HMRC will then tell you how much Income Tax you owe.

What allowable expenses can landlords claim?

Allowable expenses for landlords can include:

• property maintenance and repairs (eg replacing windows or roof tiles)
• ground rents and service charges
• redecorating between tenancies
• insurance (eg building, contents and public liability)
• water rates, council tax, gas and electricity (if you pay them, rather than your tenant)
• gardening and cleaning costs
• letting agent fees/management fees
• legal fees for lets of a year or less (eg for legal advice about pursuing unpaid rent, etc)
• accountancy/bookkeeping fees
• direct costs (eg phone calls, stationery and advertising for new tenants)
• vehicle/fuel costs (only the proportion used for your rental business)
• costs for disposing of old items of furniture or electrical appliances, etc.

What expenses can’t landlords claim for?

Landlords cannot claim mortgage capital repayments as an allowable expense. And although previously landlords could deduct mortgage interest and other finance costs such as mortgage arrangement fees from their rental income to help reduce their Income Tax bill, the rules changed in 2017. Instead, landlords now receive a tax credit of 20%.

Installing a new security alarm system can only be claimed as an allowable expense if you’re replacing the previous security alarm system – like for like – it cannot be superior. If replacing an existing alarm system would have cost £400 but you spend £650 on a superior system, you can only claim £400 as an allowable expense.

What about property maintenance, repairs and improvements?

Maintenance and running repairs can be claimed as allowable expenses. So, for example, replacing a shower, bath, washbasin or toilets is allowable, because they’re classed as repairs, as long as you replace like for like.

Improving a property, for example, by adding an extension or doing a loft conversion, cannot be claimed as an allowable expense. In tax terms, you’re making a “capital improvement”, because upgrading, adapting or enhancing a property increases its value. However, you may be able to claim capital expenses against Capital Gains Tax if you later sell the property, so keep records of all such capital expenses.

Can landlords claim Replacement Domestic Items relief?

As a landlord, you can’t claim an allowable expense for the cost of replacing furnishings or equipment in your rental property. However, you may qualify for Replacement Domestic Items relief, which will reduce your Income Tax liability.

If your rental property is furnished or part-furnished, you may be able to claim Replacement Domestic Items relief for replacing sofas, beds, carpets, curtains, white goods, sofas, crockery, cutlery, etc, as long as the quality is similar – the value cannot be superior. If it is superior, you can only claim (as an allowable expense) the amount that would enable you to replace items like for like.

Having to complete and file a Self Assessment tax return is a pain that many landlords can do without. We can help. GoSimpleTax offers you an easier way to complete and file your Self Assessment tax return.. And to ensure that your tax return is error-free and that you’re claiming all of your allowable expenses, why not get your Self Assessment tax return checked by one of our experts?

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.