What Expenses Can UK Landlords Deduct From Rental Income?

If you receive rental income from letting out property in the UK, you’ll likely need to declare that rental profit on a self-assessment tax return. The good news is that landlords can deduct certain allowable expenses before calculating tax. But what costs can you offset against rental income?

Allowable expenses help reduce your taxable profit, which in turn cuts your income tax bill. However, the rules on deductions depend on your property type and circumstances. For example, you may be able to offset different amounts for mortgage interest depending on whether you let residential property or commercial units.

Key Allowable Deductions for Landlords

Typical allowable expenses for landlords include:

  • Mortgage interest – You can usually deduct 20% of residential mortgage interest. For commercial property, deduct 100%.
  • Repairs and maintenance – Deduct costs to restore property to original condition e.g. fixing a broken boiler.
  • Services and bills – Water rates, council tax, utilities, cleaning, and gardening services.
  • Letting fees – Deduct letting agency charges and management fees.
  • Professional fees – Accountancy and legal fees related to letting out the property.
  • Insurance – Deduct buildings, contents, public liability and other relevant policies.
  • Advertising – Marketing costs to find new tenants.

Rules and Exceptions

Bear in mind that capital improvements can’t be deducted from rental profit. These are defined as alterations that improve on or change the property’s original state. For example, you can’t deduct costs for a kitchen upgrade.

Also note that there are special rules for certain property types like furnished holiday lets. And if you claim for part expenses shared between rental and personal use, you can only deduct the rental portion.

Mortgage Interest Rules

For residential property, individual landlords can usually only deduct 20% of their mortgage interest payments from property income. This aims to offset the basic 20% income tax rate. However, the deductible amount may differ if you pay tax at a higher or lower rate.

There are also special rules if you used an increased mortgage loan to fund repairs or improvements. The interest on this extra borrowing may still qualify for tax relief even if the work itself doesn’t count as “repairs”.

Get Professional Advice

Deductions can be complex, with expenses qualifying in some situations but not others. Before completing your self-assessment, it’s worth consulting an accountant or tax advisor about your individual circumstances. They can ensure rental expenses meet the “wholly and exclusively” test for deductibility.

Careful record keeping is also vital when claiming deductions like part expenses. With good documentation, you can maximise allowable costs and legally minimise your rental income tax bill. Just don’t fall foul of the rules by deducting prohibited costs like capital improvements.

Disclaimer. This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.


For more information about our services and how we can help your business please get in touch.
Scroll to Top