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Until recently, allowable expenses and tax relief looked very different on a UK landlord’s property income tax return. From furniture allowances to mortgage interest offsets, cost relief was a valued support for the nation’s buy-to-let professionals.
The rules have tightened up, however, and while there are specific services and essentials you can claim as an allowable expense – like your landlord insurance policy premium payments – other things aren’t allowed. Or, at least, they’re treated more stringently.
Here are the landlord deductible expenses HMRC say you can claim for when completing your property income tax return.
From the building itself to the contents you’ve provided, plus third party injuries or property damage – these are everyday risks faced by most UK landlords. Most mortgage lenders require you to have a landlord insurance policy in place as a condition of securing a buy-to-let mortgage – a regular house or home insurance policy won’t do. You can usually claim your landlord insurance policy payments as an allowable expenses, including some popular optional covers like:
- Rental income protection – in case your property’s damaged and you can’t rent it out
- Terrorism – in the unlikely event that your property is damaged or destroyed by an act of terrorism
- Landlords' contents – covers items such as furniture and upholstery that are the property of the landlord
Supercript offer customisable landlord insurance for residential and commercial landlords. Get set up today and remember to file your payment history ready for when you complete your property income tax return.
Maintenance and repairs
HMRC are very clear about claiming for your maintenance costs – these will need to be exclusively related to your rental property (you can’t claim for any personal property maintenance) and must be for repair and not be for improvements that add to the capital value of the home.
For example, HMRC say you can’t replace a laminate kitchen worktop with a granite worktop and claim it as an allowable expense – this would be classed as an improvement.
Sorting out normal wear and tear, maintaining your property so that it’s ready and fit for tenants, and undertaking repair works are all usually tax-deductible activities, so keep good records for your rental income tax return.
This will depend on the set-up and rental agreement you have with your tenants. But in general, utilities like water rates, gas and electricity bills are tax-deductible, along with council tax.
The bills and utilities need to be wholly and exclusively for your rental property, so keep payments and records separate from your own home finances and utilities management.
Maybe you’ve hired a gardener to take care of your property’s outdoor spaces, or a security professional. If so, their wages and certain other service payments are usually allowable expenses for landlords, on a property income tax return.
The same usually goes for services like pest control, cleaning, a boiler repair professional or emergency plumber, as long as they’re exclusively for the maintenance of your rental property.
Letting agents and management fees
If you’ve decided to let your rental through a letting agent, and thousands of property owners do, their fees can count as allowable expenses for landlords, on a property income tax return. Management agent fees are usually treated the same by HMRC, so keep track of the invoices.
Depending on the letting or management agency, this fee can be as much as 10-15% of your monthly rental income so is well worth recording and claiming as an allowable expense.
Certain legal fees
No surprises here – the rules around legal expenses and your landlord tax return can be complex. In general, if they’re wholly and exclusively for the purposes of your rental business, legal fees for lets of a year or less, or for renewing a lease for less than 50 years, are tax-deductible.
If you’re unsure, check with HMRC or a qualified tax professional which category your legal expenses fall into.
Many landlords choose to pay an accountant to handle property financials on their behalf. Their fees and invoices are usually tax-deductible, as long as the work they’re doing is wholly in relation to your rental property or portfolio.
You can’t, for example, ask an accountant to take on your personal financial affairs and claim any part of their invoice for this work as an expense for your rental business. Most accountants will be familiar with the rules and adept at separating things out, but make sure you check and confirm this with them.
Sub-letting rent, ground rents and service charges
The rent you receive from your tenants isn’t tax-deductible. However, if you’re sub-letting (and there are a number of separate rules attached to this), you can opt into the government’s Rent a Room Scheme, which provides some tax exemption.
Ground rents and other service charges are also usually allowable expenses for buy-to-let properties.
Certain 'direct' costs
HMRC lists these as things like phone calls, stationery and advertising for new tenants. Bear in mind though that you’ll need to keep clear, organised records, and it can be very easy for phone bills to cover personal and business affairs, especially if you’re using one phone for everything.
We’ve covered a landlord part expenses example below, demonstrating a scenario where you’d need to split your allowable expenses out.
Associated vehicle running costs
If you’re using your car or another vehicle in connection with your rental property, you can claim costs and expenses in your property income tax return, but only for the part used for your rental business. This may involve splitting the expense amount out between personal and business use.
Landlord part expenses example
If you’re driving three hours each way for a property inspection, you could claim for petrol you’ve used. But if you detour to visit a friend on the way, or to pick up personal groceries, you’d need to deduct this part of the cost from your buy-to-let allowable expenses.
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