The HMRC test
Expenses must be wholly and exclusively for the rental business. Capital improvements are not allowable as expenses — they reduce CGT on disposal instead.
Fully allowable
- Letting agent fees and management fees
- Buildings and contents insurance
- Service charges and ground rent
- Council tax and utility bills (where paid by you, not the tenant)
- Repairs and maintenance — like-for-like replacement
- Cleaning between tenancies
- Gardening and routine ground maintenance
- Replacement of Domestic Items relief — sofas, beds, white goods, carpets
- Professional fees — accountancy, legal fees for short tenancies (under 1 year)
- Travel to inspect or maintain the property (mileage at 45p/mile up to 10,000 miles)
- Cost of advertising for tenants
- Direct costs of letting (referencing, inventory clerks)
Mortgage interest — restricted
Since 2020, individual landlords get only a 20% tax credit on mortgage interest — see Section 24 Explained.
Not allowable
- Capital improvements (extensions, new conservatories, first-time fitted kitchens)
- Personal expenses
- The capital portion of mortgage payments
- Stamp Duty Land Tax on purchase
- Legal fees on purchase or for tenancies over 1 year (capital — reduces CGT)
- Clothing
- Your own labour
Repair vs improvement — the grey area
Replacing a broken boiler with an equivalent modern one = repair (allowable). Replacing it with a higher-spec system that adds value = improvement (capital).
When in doubt, document the decision with photos and quotes — HMRC enquiries often hinge on this.
Ernest & Co specialise in landlord tax. Book a portfolio review.