Allowable Expenses

Finance costs can include mortgage interest, mortgage arrangement fees and bank charges. Finance costs are often the most misunderstood expense for landlords. Whilst you cannot claim the capital repayment, the interest portion of your mortgage payment is allowable. However, the finance costs are not a standard deductible expense against your rental income. Instead, 20% of the finance costs paid can be claimed as a relief against the tax liability of the net rental profits. If you do not utilise your finance costs in the current year they can be carried forward to the following year.

This restriction is not applicable if the rental property is held in a limited company.

For landlords, repairs and maintenance are important expenses that can be deducted from rental income.

These are daily expenses that help maintain the property and ensure it remains in a habitable condition. It is important to distinguish between repairs and capital improvements. Although repairs are deductible, improvements and alterations that may add value to the property are not.

Common deductible repair costs include redecoration, damp proofing, plumbing, and electrical repairs. The cost of replacing a roof and old windows with new UPVC double glazing is also regarded as a repair. If you are unsure whether a specific expense qualifies as a repair or an improvement, please get in touch.

We often get asked if it is possible to claim for work you carry out yourself on the property. Unfortunately, this is not an allowable expense.

Replacement of furniture and white goods (Replacement Domestic Items Relief) is a tax relief available to landlords, allowing them to claim relief on the cost of replacing certain household items in rental properties, for example, furniture and white goods.

This relief is designed to make it easier for landlords to maintain their properties by helping offset the costs of replacing worn-out furniture or domestic appliances.

While Replacement Domestic Items Relief allows landlords to claim expenses for replacing certain items in the rental property, the initial cost of furnishing the property is not an allowable expense.

Letting agent fees represent a significant expense to consider when assessing rental profits. Landlords can deduct several key allowable expenses, some of which are incurred through their letting agent. These fees can cover a range of services, which include but are not limited to rent collection, tenant-finding, management, inventory, and maintenance coordination.

Many landlords may not be aware that accountancy fees can be claimed as an expense against rental income. This is allowable provided the accountancy fees are incurred in relation to reporting rental income to HMRC. If you are interested in finding out more about our fees, please click here.

Some types of insurance will be an allowable cost against your rental income if they are directly related to the rental property. These will include policies such as Landlord Insurance, Appliance Breakdown Cover, and Buildings and Contents insurance. Personal insurances such as life assurance are not allowable.

Service charges on a property are fees paid to cover the cost of maintaining and managing shared areas or services in a building or development, such as electricity in common areas or upkeep of the building. Service charges are typically paid regularly, such as monthly or annually and you can claim these as part of your allowable expenses.

Ground rent is a payment made by a leaseholder to the freeholder for using the land the property is built on. This is a deductible expense if you, as the landlord, are responsible for making the payment.

Typically, the tenant is responsible for paying Council Tax. However, if you, as the landlord, are required to cover this expense or if there are any void periods, these costs can be claimed as allowable expenses.

Utilities include water, gas, and electricity. If you, as the landlord, are responsible for paying the utilities, then these can be claimed as an allowable expense against your rental income. However, if the tenant pays these bills directly to the supplier, you cannot claim these as an allowable expense.

This is the full price you have paid for the property and is not deductible against the rental income.

Any SDLT paid is treated as part of the purchase and is added to the cost of the property

Legal fees incurred for the conveyancing, including all disbursements are also treated as part of the cost of the property and cannot be claimed against the rental income.

Any building servey costs are treated as part of the purchase and is added to the cost of the property

If you have bought at auction then the auctioneers costs are treated as part of the cost of acquiring the property and not allowable against rental income.