Residential landlords can deduct the running costs of the letting business that are incurred wholly and exclusively for it and are not capital: letting agent and management fees, repairs and maintenance, insurance, ground rent and service charges, bills and council tax the landlord pays, accountancy fees, advertising and business travel. Mortgage interest is not deducted but gives a basic rate tax reduction, and the cost of buying, improving or first furnishing a property gets no income tax relief.

What test does an expense have to pass?

HMRC’s Property Income Manual at PIM2005 sets two conditions. The cost must be incurred wholly and exclusively for the purposes of the property business, and it must not be capital. Sections 272 and 272ZA of ITTOIA 2005 apply the trading income rules to property businesses, so the same principles that govern a sole trader’s expenses govern a landlord’s. Our guides to the wholly and exclusively rule and capital and revenue expenditure explain both tests in depth.

Where only part of a cost relates to the letting, the identifiable business part can be claimed. HMRC’s own example is a landlord who buys 12 square metres of tiles for £240, uses 8 square metres in the let bathroom and the rest at home: two thirds, £160, is deductible. By contrast, a vacuum cleaner bought for your own home and also used between tenancies is not deductible at all, although cleaning products bought specifically for the rental are.

Which running costs can a landlord claim?

HMRC’s landlord guidance lists these as deductible when the landlord pays for them:

  • Letting agent and management fees, including rent collection.
  • Repairs and maintenance that restore the property rather than improve it. Our guide to repairs and improvements on a rental property covers the borderline.
  • Water rates, council tax, gas and electricity where the landlord, not the tenant, is liable.
  • Insurance, such as landlord policies for buildings, contents and public liability.
  • Services, including the wages of gardeners and cleaners.
  • Rent, ground rent and service charges, including rent you pay if you sublet.
  • Direct costs such as phone calls, stationery and advertising for new tenants.
  • Accountancy fees.

Some of these come with conditions. PIM2210 says wages for staff who manage the property are deductible, but pay must be paid within nine months of the end of the tax year to be deducted in that year, and you cannot deduct anything for your own time. PIM2070 allows newspaper and online adverts for tenants but treats permanent signs as capital. Where an insurer pays for a repair, PIM2040 allows only the part of the cost the insurance did not cover, and HMRC’s guidance applies the same rule where you keep a tenant’s deposit to pay for damage.

Replacing furniture, appliances and furnishings is not a repair, but it may qualify for replacement of domestic items relief.

Which legal and professional fees are allowable?

PIM2120 draws the lines:

  • Legal fees, agent’s fees and commission for a let of a year or less are deductible. The same costs for the first let of a property for more than a year are capital.
  • Normal fees for renewing a lease of less than 50 years are deductible, except any part relating to a premium. A replacement lease on broadly similar terms stays deductible even if the tenant changes.
  • Costs of evicting a tenant in order to relet, valuations for insurance and subscriptions to landlord associations are allowable.
  • Legal costs of buying a property, planning negotiations and pursuing capital debts are not.

Under a long standing practice, normal recurring accountancy fees for preparing the accounts and agreeing the tax liability are allowed. That practice does not extend to fees for preparing a personal tax return or working out Capital Gains Tax, or to fees arising from an HMRC enquiry that leads to an amendment for careless or deliberate behaviour. See legal and professional fees for the wider rules.

Can landlords claim travel and home office costs?

Yes, within limits. PIM2220 allows the running costs of travel between properties for the business. A trip from home to a let property is allowable only if its purpose is exclusively business; a journey that also takes in the weekly shop is not.

Unincorporated landlords can use fixed mileage rates instead of actual costs and capital allowances. For 2026 to 2027 the rates are 55p a mile for the first 10,000 business miles in a car or goods vehicle, 25p a mile after that and 24p for motorcycles. The fixed rates are not available for a vehicle on which capital allowances have already been claimed.

PIM2100 says that if you genuinely run the business from home you can claim the extra costs this causes, such as additional heating and lighting. A proportion of fixed household costs is allowable only where part of the home is used exclusively for the business for a significant amount of time.

How is mortgage interest treated?

For individuals letting residential property, interest and other finance costs are not deducted in working out the profit. Relief is given as a reduction in the tax bill at the basic rate. The restriction covers interest on mortgages, loans to buy furnishings and overdrafts, together with arrangement fees and other incidental costs of the loan. Only the interest is relevant; the capital part of a repayment mortgage gets no relief at all.

HMRC’s guidance adds that a loan used for both residential and commercial property must be apportioned, as only the residential part is restricted. Interest on extra borrowing is allowable only if the money is used wholly and exclusively for the letting business, and interest on borrowing above the property’s value when it was first brought into the business is not deductible. Companies are not affected by the restriction. The calculation is explained in landlord mortgage interest relief.

What about costs before the first tenant moves in?

PIM2505 explains that a property business usually starts when the first property is let. Under section 57 ITTOIA, revenue costs incurred in the seven years before that date can be claimed if they would have been allowable once letting had started. They are treated as incurred on the first day of the business.

Work to make a newly bought property fit to let is different. HMRC’s guidance says that where a property is bought in a run down state, at a substantially reduced price or not fit for letting, the work to put it right is capital, not a repair. Once the business has started, costs of preparing a second or later property are part of the existing business and follow the normal rules.

Which costs are commonly disallowed?

  • The property itself. The purchase price, the legal costs of buying and any loss on sale are capital. So is depreciation (PIM2005).
  • Improvements. HMRC gives an extension, a security system where none existed and a kitchen of a higher specification as examples. Keep records, as capital costs may reduce a later capital gain.
  • The first furnishing of a property. Replacement relief covers replacements only.
  • Private costs. Private phone calls, clothing such as a suit worn to a meeting with a tenant, and costs of your own home.
  • Uncommercial lets. For a property let cheaply to a relative, expenses are capped at the rent received.

How does it work for one property?

Illustration only. Tom lets a flat for £15,600 a year. In the year he pays:

Cost Amount Treatment
Letting agent fees £1,872 Deductible
Landlord insurance £420 Deductible
Boiler service and repair £380 Deductible repair
Ground rent and service charge £1,200 Deductible
Accountancy fees for the property accounts £480 Deductible
300 business miles at 55p £165 Deductible
New conservatory £8,000 Capital, not deductible
Mortgage payments (£5,000 interest, £4,000 capital) £9,000 Interest gives tax reduction only

Allowable expenses total £4,517, so the taxable rental profit is £11,083. Separately, Tom receives a tax reduction of £1,000, which is 20% of the £5,000 interest, subject to the limits in the finance cost rules. The conservatory cost is recorded for Capital Gains Tax. For how the profit is then taxed with other income, see how rental income is taxed.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.