Allowable expenses on a rental property
What are the allowable expenses on a rental property?
Landlords looking at how to claim expenses on their rental property will also need to know what are the allowable expenses for the purposes of landlord tax.
I’ve been contacted recently by several landlords who were enquiring whether some of their recent building works on their rental property were an allowable revenue expense for their rental business. There appears to be a lot of confusion amongst landlords about what they can or can’t off-set against their rental income. We’ve written before about the sorts of expenses that landlords can deduct and how to avoid tax on rental income.
As part of my research I unearthed a really useful publication, the HMRC Property Rental Toolkit . It should answer many landlords questions. On pages 6-7 there is a very useful checklist, which landlords can use to work through their tax calculations to ensure they don’t miss anything in their tax calculations.
Remember, that where a landlord has multiple rental properties that you are looking at your expenses for the rental property business as a whole and not for each individual buy-to-let property.
Landlords can also use our free property management software to calculate their tax liability.
List of allowable expenses on a rental property
- Water rates
- Council tax
- Gas bills
- Electricity bills
- Ground rent
- Service charges
- Letting agent fees
- Legal fees for your rental business
- Accountancy fees
- Phone calls and charges in connection with your rental business
- Stationary and admin costs
- Advertising costs for your letting your property
- Mortgage Interest costs (not after 2020)
- Wear and Tear now replacement of domestic items relief (RDIR)
Revenue versus Capital
Any allowable expense on a rental property should be ‘wholly or exclusively’ incurred as part of a landlords rental business. It will end up being classified as either a revenue or a capital cost. We’ve included articles before about how to distinguish whether an expense is wholly or exclusively’ incurred as part of a rental business.
If the expense is a revenue expense, a landlord will be potentially liable to off-set it against any rental income, thereby reducing rental profits and income tax liabilities. Any capital costs will be included in your base costs and will be used to calculate what capital gains tax should be paid.
Repairs Versus Improvement of Rental Property
One of the main questions landlords get confused about is whether the expenditure is a repair or an improvement of their rental property. A repair is a revenue expense and can be off set against your rental revenue. If the work is an improvement it becomes a capital cost and will only come into play if a landlord sells their rental property.
An example of a repair would be the replacement of a slate roof. This would be allowable against a landlords revenue costs. If the costs related to a completely new roof, say as a result of an extension to the property – this would be considered to be an improvement to the property. As such the costs would then have to be added to a landlord’s base costs. These would then be taken into account if the landlords disposed of the property, and would be incorporated into the calculation of any capital gains.
Apportionment of Rental Income
Where it get’s slightly more complicated is where there are elements of repair and new in the same project. This happens quite a lot when it comes to refurbishment of a property. In simple terms if we take the roof example again. If a landlord decided to renew their slate roof at the same time as they were adding in a side extension doubling the roof area then how would they need to assess their tax liability for these works? This is where the concept of apportionment comes in. In this scenario you would need to have a cost for both the repair and new build elements. The repair or replacement of the roof would count as a revenue cost. The new build costs would be added to the overall base cost of your property and would be assessed if your property was sold and taken into account in the capital gains calculation.
The revenue helpfully give examples in their Toolkit of typical repairs undertaken by a landlord in their rental property. These include:
• exterior and interior painting and decorating
• stone cleaning
• damp and rot treatment
• mending broken windows, doors, furniture and machines such as cookers or lifts
• re-pointing
• replacing roof slates, flashing and gutters
For more details of how to account for general deductions and repairs have a look at the HMRC specific guidance manual pim2020
New materials
Another complication can occur with the effluxion of time where technology and building technology improves. For example until recently the replacement of UPVC double glazing was seen as an improvement over single glazed wooden units. This is no longer the case.
Taxation of rental business – ‘grey areas’
There are many grey areas of taxation for a landlord to navigate. If landlords need a second opinion why not post your questions to our landlord forum.
Landlords need to often take a view on whether it’s likely to be disputed that the new flooring or bathroom suite installed in their rental property would be picked up by the slightly overstretched HMRC as an improvement to their rental property or will just sail through their self assessment return as another repair expense.
What landlords always need to do is to have a well prepared and evidenced approach based on the latest taxation guidance to avoid tax return errors. Then at least they will stand a sporting chance of winning their argument if HMRC were ever to dispute their case and a landlord having to avoid a tax investigation.
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Hi, I’m a landlord and a 3rd party has made claim against the land, which belongs to the property I own and rent out. Are the costs associated with defending this claim tax deductible?
Regards, Paul
I am a landlord, are gas checks tax deductible? If so under what section. Thanks
Definitely yes, doesn’t really matter but you could try professional fees.
Hi there. I’m a landlord trying to find out if the freeholders annual reserve/sinking fund charges are regarded as yearly repairs and maintenance tax deductibles or are capital charges to be set aside for Capital Gains Tax on disposal of the property?
Good question! I would guess if it allowable at all it would be a revenue expense i.e. repairs and maintenance as part of the service charge. Can’t see it working as capital because you can’t have a notional capital cost.
Just doing our tax return and I see that installing double glazing is doubtful for claiming for tax relief? Surely replacing rotting wooden single casement windows which provides the tenant significant benefits would be an allowable expense??
Hi Ian, I understand that the Revenue have generally conceded that double glazing is a revenue cost and counts as a repair and not an improvement. Not sure whether this would be the case for tripple glazing. One to ponder.
Can I check how costs incurred as part of preparing a rental property for sale would be classified please? For example home staging costs are clearly treated as eligible for capital gains tax in the US, but I can’t seem to find anything suggesting one way or the other here in the UK. Also, any repairs or maintenance undertaken while the house is being sold, after the tenants have left?
Can Rent Guarantee Insurance be claimed as an allowable tax deduction on a rental property?
Current tenant wanted to erect a shed, the agent suggested the landlord should pay for it and erect it to avoid any problems. ….
How do i account for this? it cost £750
It’s a capital cost.
Hi,
I have had to replace the garden shed on a rental property as the previous one collapsed due to its age etc. Is this tax deductible?
Tricky if it replacement with the same size and spec it’s probably a revenue cost so yes allowable. If it’s much bigger / better could be classed as an improvement and therefore a capital expense but also allowable on calculating your base costs on sale for capital gains purposes.
Thanks Chris, it was an identical replacement.
Hello Chris,
I am a landlord. Our rented flat was in need of a refresh following the departure of tenants.
I decided to do the redecoration myself – which worked out to be 3 days work. (I am not a professional tradesperson.)
Can I include a charge for my own time as an allowable expense to be offset against income in my tax return?
Thanks
Hello SYD W I have exactly the same question. I can’t find the answer to this anywhere on the internet!
Hi SYD W – did anyone answer your question here? I have the same situation and want to claim if possible.
Sadly not. The cost of the paint and any other items you bought for the job can be claimed but not your own time. IF you employed a painter/decorator then their invoice would be a revenue cost. HMRC don’t seem to acknowledge that a landlord’s personal time is valuable! Travel to the property in your own car or other means would, however, be another item you can deduct as a revenue cost. Your own car would be mileage there and back x 45p.
Short answer is no.
If you could claim your time for decorating as a rental cost then you would also have to declare the profit of your new decorating business and pay exactly the same tax!
Have rental property – monthly service charges and major works charges…are both treated the same as expenses, I know the service charges definitely is please?
The major works charge would depend on whether or not the charge relates to a revenue or a capital item. Hence if it was just repairs to roof etc then it would be revenue but if it related to an improvement in the value of the property long term then it would be capital and you would need to add it to the original cost of the property.
Hi there,
I know that letting agent fees are a claimable expense- however I have read somewhere that we can not claim any costs for the first letting of the property- is this correct?
I have recently replaced windows and put a new door in is this a capital expenditure at a cost of over £3000?
The parking area is disintigrating and so resurfacing is this a capital or allowable expense the cost is £1600?
Many thanks
Hello,
If I get a gardener or cleaner to look after/clean the rental property or a regular basis (monthly), is this an allowable expense and would I need to also pay employer contributions (tax/NI/pension/etc) by going down this route? Or can I just pay the one off fee each time without all these extra liabilities?
Thanks.
Making Tax Digital for landlords I believe is compulsory from 6/04/2022 if income over £10k. Can anyone recommend a software package or is it easier to pass to an accountant?
Thanks
Would replacing carpets sullied by tenants prior to sale, and general post tenancy maintenance (not improvements) be classed as a deductible cost for CGT purposes?
Anyone know if new carpets are a revenue or capital cost? Looking to buy a BTL and the current carpets are filthy and threadbare, so need replacing.
Hi,
I have just put my property up for rent. We had the roof refitted as there was a major leak. It was a like for like roof. We also had to replace the white goods fridge, washing mc as the washing Mc gave up a few days ago. The fridge had a broken dispenser. All replaced for like for like. Can I include these in my expenses section. Thanks
I bought a house and have rented it out, am I right in thinking solicitor fees can not be seen as a tax deductible expense ? Thank you
Hi – Our previous tenant used to dry his clothes inside a flat, this caused damp and mould in every wall. A builder repaired the walls which got damp again within 8 months. We then did damp proofing of the whole flat, after asking the tenant to leave because it was a lot of work for someone to be living there. Is the dam proofing work tax deductible or capital cost?
Hi, I am a new landlord, are things such as getting an EICR certificate and doing the inventory allowable expenses? Thanks
I have inherited a lease hold flat. The flat is very much in need of total refurbishment in order to rent out and satisfy legal obligations – health/ safety -as a landlord.
The lease is so low that I am in the process of extending the lease too which is around 100 k. We are having to change and install all the kitchen, new electrics, bathroom, boiler , radiators which are essential . Then there’s painting decorating and new flooring. With exception to the lease extension costs, can I offset these other expenses against earnings?
They are not serviceable in their current state for tenants .
Hello. I’m trying to find a list of allowable expenses at the end of a tenancy. Is there such a thing? The property needs decorating and refreshing generally, but the tenant’s dog has ruined the wooden floor which now needs replacing. Is this an allowable expense?
No specific list it is what ever is reasonable to allow you to rent out your property.
I’m a landlord and when I had the EICR done the lighting circuit failed . Can I put through the replacement of the lighting circuit in my accounts as an allowable expense?
Hi I’m a U.K. landlord with 3 properties . Can I claim £6 per week on my tax return for using my home office ?
What costs can I claim ( fuel ) for visiting these properties 4 times per year ?
Do I need fuel receipts ?
Any other claims I can make on my tax return without receipts ?
Thank you in advance.
I’m confused, if I claim the £1000 allowance on my rental property, does this work on the gross income? The property is managed by a letting agency and they deduct their fees and transfer what’s left. So on self assessment are the letting agents fee’s allowed and then I claim the £1000 allowance if I haven’t made other maintenance deductions?
Hi, I am a landlord and have included WIFI in our rental property to students. Can I deduct Internet costs as an expense for tax purposes?
I,m selling a rental on which I have just had the Electrics upgraded and certified to the lastest requirement. Is the cost of this able to be offset against Capital Gain on selling. IE: ‘Improvement’ or ‘Maintenance’ ? (In the UK)
?
Good day
My clirnt declared income and expenses for bonded flats rentals to Sars annual returns, Sars requested supportimg materials
Could you kindly inform how to compile Flats Schedule of income and expenses for TAX YEAR ended 28 Feruary 2021
Regards
Hi, my tenant got in touch recently due to a leak caused by missing roof tiles. The roofer that has accessed the issue has said the whole roof ideally needs replacing (something we knew may be coming unfortunately), I would class this as repair but should it be? Also if classed as repair this would be an allowable expense to claim wouldn’t it?
Yes did my roof a couple of years ago. Technically there is an area of debate where replacement becomes an upgrade. So for example if you replaced a bog standard tap with a solid gold one then HMRC may see that as an improvement which not all is off setable against your rental income see HMRC BIM46901 – Specific deductions: repairs and renewals: overview
Hi – i’m a first time landlord. To clarify are the gas and electric safety certificates deductible? Also smoke and CO detector installation and cost?
thanks
Yes
Hi,
My landlord local authority planned major work and issued S20 can I claim against this work, mainly external
Kind regards
Maj
Hi
I have recently rented my family home out. I had to update the electrics which cost £1400 to bring them to standard. I Had new carpets put down. Had the bathroom redone as the toilet and shower cubicle were leaking. I had to paint. Can deduct these on my tax return?
Are gas and energy efficiency tax deductible?
Many thanks
I have a rental property. Today I had to have the boiler replaced, after it was deemed uneconomical to repair. Part of the costs for that were covered by my insurance, but the majority wasn’t covered. Can I reduce my rental income for the year for tax purposes, by the amount that wasn’t covered?
I’m pretty sure it’s a ‘no’ but if one is renting a property from someone else (that is your primary residence), in order to rent out the property you own, is the rent one pays an allowable expense i.e. rent received minus rent paid (and other allowable expenses) = taxable amount
or would you have to pay tax on the entire rent you receive (less allowable expenses etc. of course)?
It’s my first year filing my property income for 20/21 and I know that interest on the mortgage loan is restricted to 20% tax credit but, what about lender fees i.e. Barclays charge £1,800 product fee on the BTL mortgage. It looks like in previous years this could be deducted if, so where on the return to I add this and is it restricted to 20% tax credit or fully deductible?
Any deductable expense paid in cash, can that be used as a deduction? How can I evidence the expense.
Hello Chris,
I remortgaged house for buy to let, moved out, then carry out boiler replacement as old one broke down . That was 1 week before new tenants moved in. Can I treat that as an expense?
Thank you in advance,
I would say yes but the answer will be in PIM2500 Property Income Manual. Failing that ask your accountant as I’m not.
can you claim for a fire door being fitted to the rental property
Hi, I am about to rent a property, we needed to update the carpets due to wear being 11 years old and 2 bathrooms suites as I was leaking behind the wall into the kitchen and other needed a shower adding and new tile etc, are these expenses or capital?
Thanks
Before the tenancy on my rental property started, I had to spend significant amounts in order for the property to pass gas and electrical safety tests. I also incurred some other expenses before the tenancy such as the building’s service charge. Can I claim these expenses even though they were incurred before the tenancy started? Thanks, Robert
Hi Robert,
I am in same boat, Before tenancy start I have spend amount to pass gas and electrical safety test. Do you have any update if you find out if expenses can be charge as expense ?
Thanks
hi I need some urgent help, been renting out for last 3 years and didn’t declare to HMRC as I have to pay for cladding and don’t know whats the amount, hence been trying to save some. however HMRC found out that I have been renting out and want to know the exact amount I own them, I would like to know can I put the Service charge/ rent ground of expense please? I don’t own a limited company
many thanks
Hi Robert,
I am in same boat, Before tenancy start I have spend amount to pass gas and electrical safety test. Do you have any update if you find out if expenses can be charge as expense ?
Thanks
I had to move because of work. My only home is now rented out while I pay rent and council tax where I live. Can i claim the rent and council tax against the rental income?
Some travel expenses that are necessary for managing and operating your buy-to-let business can be acceptable. You can deduct expenses like gas, vehicle tax, insurance, repairs, as well as bus and train fees. But once more, you can only claim for travel necessary for managing and operating your firm. You can deduct 10% of the connected expenses if you own a car that you drive 10% of the time to and from your rentals. Private or common travel cannot be claimed.
Hi – i inherited a property last year and have rented it out. We were advised by the roofer to get a new slate roof on the house and also had to replace the flat roof garage as this was asbestos and leaking. Can I offset this against income. Many thanks.
I am a landlord and a leaseholder of a flat in a local authority building. There is a plan for major repair works, including replacing of the existing single glazed windows with new ones ( aluminum) and it would cost about 50 k.
Are all those expense capitalized? Basically it would mean i will be declared bankrupted as it`s impossible for me to pay the cost upfront. I am devastated. Please share your thoughts