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We explore 5 of the main categories of allowable expenses that landlords need to be familiar with to run successful buy-to-let property.
Written by
Ben Luxon
PUBLISHED ON
Jan 28, 2025
Over the years, the UK government has introduced alterations to buy-to-let tax relief, such as restricting financial deductions like mortgage interest in the section 24 tax changes. These changes have affected the allowable expenses for rental income and made it increasingly hard to operate a profitable buy-to-let portfolio.
Because of this, it's more important than ever for landlords to have the right tools and knowledge to identify and accurately track all of the operating costs that are considered allowable expenses for landlords.
In this article, we outline the top allowable expenses for landlords and what every property investor needs to know in order to maximise their tax liabilities through at tax deductible expenses. We'll also explore the best tools to help you stay on top of your expenses to increase your portfolio ROI.
Allowable expenses are business costs that landlords can deduct from their rental income to calculate their taxable profit. These deductions help reduce the amount of tax owed. To qualify, expenses must be wholly and exclusively incurred for the purpose of renting out a property.
Common examples of allowable expenses include:
By understanding what qualifies as an allowable expense, landlords can ensure they claim all possible deductions, optimising their rental income.
Claiming allowable expenses is not just about tax compliance—it’s a smart financial strategy. By deducting eligible costs, landlords reduce their taxable rental profit, leading to a lower tax bill. This, in turn, improves overall profitability and increases after-tax returns.
For private landlords, mastering the process of claiming allowable expenses can make a significant difference in long-term financial success.
Now that we’ve covered the importance of allowable expenses, let’s explore some of the most common deductions:
View the Full Rental Property Deductions Checklist here.
Allowable expenses for rental income are bracketed into five main categories according to the HMRC. For an expense to be claimable against your buy-to-let income it must be used ‘wholly and exclusively’ for the management of your property.
In this context wholly and exclusively means that the expense cannot also be used for personal or other business use. For example, if you buy office equipment and us it for personal use it would no longer qualify as an allowable expense for landlords.
The main five categories for rental income allowable expenses are:
Many costs incurred when running a buy to let property, however, are not allowable expenses. This includes:
Upgrade your rental accounting systems and never miss an allowable expense again. Create your free Landlord Studio account and make digital record keeping easy, stay compliant with changing regulations, and increase your buy-to-let profitability.
Office costs include expenses like your phone, broadband bills, office equipment or other administrative expenses. However, it’s important to note that only the portion of the expense that is used for your rental business is an allowable expense.
Some travel costs related to the management and running of your buy-to-let business are allowable. For example, you can claim petrol, vehicle tax, insurance and repairs, and bus and train fares. Again though, you can only claim for the travel associated with running and managing your business. If you have a vehicle that you use to get to and from your rentals 10% of the time you can claim 10% of the related expense. You can’t claim private travel or regular travel.
Costs associated with marketing your property during vacancies such as letting agents, photography, creation of virtual tours and videos and other marketing material.
The fees that you pay to professionals for services such as accountancy, bookkeeping, interior design, etc are all allowable expenses. You can also claim for expenses related to legal services such as a solicitor in connection to debt collection, evictions or some other necessary legal service.
You can claim your insurance costs as allowable buy-to-let expenses. The main examples of this include building and contents insurance, vehicle cover for your business vehicle.
If you hire a specialist to carry out work on your properties, you can claim their charges against tax. Include charges from builders, plumbers, electricians, decorators, kitchen fitters, gardeners, cleaners, window cleaners, and carpet fitters.
However, you can only charge for work that is classed as repairs. Any work to improve the property is not allowable.
Repairs to your property are an important and potentially large allowable expense for landlords. It’s important to note, that whilst we have bracketed repairs and replacements together, the HMRC makes a clear distinction between the two.
A repair is any work undertaken that returns the property to its original condition. Examples of this include repainting the property between a tenancy, mending broken appliances or plumbing, and repairs to structural damage. Importantly, these repairs are only classified as such if they do not increase the value of the property.
Learn more about property repairs and maintenance →
A replacement on the other hand is when an asset is not repairable and is replaced with an item of equal value. For example, you might replace curtains, light fixtures, or the carpet after several years to return the property to its original condition. Again, any increase in value is not an allowable expense.
When making claims for repairs you can also include the cost of materials and any fees paid to specialists that carry out the work.
Find out more about fair wear and tear and the replacement of domestic items relief.
There are many associated costs with owning and running a buy-to-let property. Some of these include things like ground rents, council tax, utility bills, etc. If you are responsible for paying these costs then they are allowable expenses. If however, your tenants are responsible for these expenses you can only claim for any period where the property is vacant.
If you need someone to carry out a regular service for you e.g. cleaning, we recommend that you pay a fixed rate for that service and do not provide any tools or materials so that they can be treated as self-employed.
However, if for example, you employ a cleaner for one hour a week and provide all the materials, then that person is probably an employee. Be aware, that if you do employ an employee, you need to ensure that you comply with Employment Regulations including Working Time Directive, National Minimum Wage, Health and Safety and PAYE/NIC.
Any other expenses incurred wholly and exclusively for the property business can be claimed. For example, the licence fee for Houses of Multiple Occupation (HMO) is an allowable expense for landlords.
Any costs associated with restoring a property to bring a property up to a habitable standard and make it rentable cannot be deducted. This includes things like the purchase costs and repairs, conversions, or other building work that need to be completed before the property is in a rentable state.
Any work done to a property that improves the property’s overall value is counted as an improvement and is not an allowable expense. For example, if you converted the garage to another bedroom this would be an improvement.
Or if the appliances in the kitchen were broken and you replaced them with better more expensive appliances, this also would count as an improvement and only a partial amount of the cost (the cost of a like replacement) would be an allowable expense. As an example, if an appliance cost £2,000 originally and you replaced it with one that cost £3,000 you would only be able to deduct the original cost of £2,000.
In the past, you were able to deduct the whole of the interest payments on buy-to-let mortgages or other loans. This is no longer true. This buy-to-let tax relief has been phase out and replaced with a tax credit allowing you to claim back 20% of the annual interest payments as a tax credit.
Find out more about the section 24 tax changes here.
Distinguishing between capital and revenue expenditure is pivotal when dealing with property investments. However, the line between capital and revenue expenditure isn't clear-cut. For example, the expense of purchasing or enhancing a property, like adding an extension, doesn't qualify as revenue expenditure against your property income. But, if you simply redecorate a property before renting it out, this does fall under revenue expenditure.
If you acquire a property at a reduced price due to its poor condition and then undertake significant renovations, that expense is likely seen as capital expenditure. Recording and holding receipts for these expenses is crucial because most capital expenditures can be reclaimed in part Capital Gains Tax relief upon selling the property.
(These are not available on residential lettings apart from furnished holiday lets)
Whilst structural works cannot normally be claimed, capital allowances are available on the purchase of fixtures, plant and machinery.
Examples of expenditures eligible for Annual Investment Allowance (not for residential properties) are as follows:
The list is not exhaustive and you should obtain further advice from us, particularly if your expenditure is over the annual limit.
If you sell an asset on which you have previously claimed Capital Allowances, the proceeds are taken into account and may create an additional income charge.
Revenue expenses are day-to-day costs associated with managing a rental property. These include:
While finance costs fall under revenue expenses, residential landlords can only claim 20% of these costs against their tax liability due to restrictions on mortgage interest relief.
Where a residential property is not a Furnished Holiday let or no Rent a Room relief is claimed, the expenditure on replacing items of furniture and white goods will be allowed as an expense less any proceeds on the disposal of the item being replaced. The cost of assets that are not replacements is not allowed as an expense.
This relief applies to domestic items commonly used in a rental property by tenants. Eligible items include:
To qualify, the new item must be a like-for-like replacement of the old one, meaning it serves the same function without being a significant upgrade.
Claiming this relief is simple. Deduct the cost of the replacement item from your rental income when calculating your taxable profit. However, you must also:
For more on claiming replacement relief, read our article here.
If the property is used for private purposes, this is most often the case for furnished holiday lettings or if you’re not claiming Rent a Room relief, any claimed expenses must be restricted to reflect its private use.
Expenses related to the period of your prior occupation in the property cannot be claimed. For example, any maintenance done before the initial letting is considered private. Conversely, if, for example, you paid an annual insurance premium on April 1st but left the property intending to let it by the following October 1st, you can claim half of the insurance premium, even though it was paid during your occupancy period.
Beyond understanding allowable expenses, maintaining accurate records and correctly reporting taxable profits on your self-Assessment tax return are essential for compliance and avoiding penalties.
Landlords must keep records of rental income and expenses for at least five years after the tax return deadline. This helps with:
With Making Tax Digital (MTD) set to change how landlords report their income, maintaining digital records will soon become mandatory. Landlord Studio simplifies this process with features like automated expense tracking, digital receipt storage, and real-time financial reporting, ensuring landlords stay compliant without the hassle of manual record-keeping.
Declaring rental income to HMRC is a legal requirement and a key part of financial management. Landlords must:
With Making Tax Digital, landlords earning over £50,000 annually will need to submit quarterly tax updates to HMRC from April 2026, followed by those earning over £30,000 in April 2027. Landlord Studio makes storing digital records and running tax reports seamless with MTD-compatible accounting software, allowing landlords to generate profit and loss statements, tax reports, and expense summaries with ease.
This is by no means an exhaustive list of allowable expenses, but we have highlighted some of the most significant deductions that many landlords overlook.
To ensure you maximise your tax deductions, it’s critical to use a proper system like Landlord Studio to track income and expenses accurately. With MTD changes coming into effect in 2026, all landlords earning above £50,000 annually will need digital record-keeping software to stay compliant with HMRC. From April 2027, this will also apply to landlords earning over £30,000.
By leveraging Landlord Studio, you can:
On a final note, preparing for MTD now will save time and stress down the road. Create your free Landlord Studio account today and get ahead of the curve—simplify your tax compliance, automate expense tracking, and maximise your rental income.
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