Allowable Expenses for Property Landlords

Getting your expenses right is one of the most important things you can do as a landlord. Claim too little and you'll overpay tax. Claim too much and you'll risk penalties from HMRC. A good understanding of what you can and can't claim will go a long way towards getting your tax position right.

This guide explains what makes an expense allowable, covers the main expense categories, and signposts you to detailed guidance on specific topics.

What makes an expense "allowable"

An expense is allowable if you can deduct it from your rental income when working out your taxable profit. HMRC's basic rule is that expenses must be incurred wholly and exclusively for the purposes of your property business.

What this means in practice:

The expense must be for your rental business, not for personal use
If something is used partly for business and partly personally, you can only claim the business portion
The expense must be a running cost of the business, not a capital improvement to the property

Common examples:

Repairs to keep the property in good condition: allowable
Letting agent fees: allowable
Extending the property or adding a conservatory: not allowable (capital)
Your personal groceries: not allowable (not for the business)

For detailed guidance on the wholly and exclusively test and how to handle mixed expenses, see Personal use and mixed expenses.

Common allowable expenses

These are the main categories of expenses you can claim against rental income. This is an overview to help you understand what's typically allowable — see Which income or expense category should I use? for detailed guidance on categorising each type of expense.

Expense type	What you can claim	What you can't claim
Repairs and maintenance	Restoring property to original condition (redecorating, fixing broken boiler, replacing roof tiles)	Improvements that enhance the property (extensions, new bathrooms, upgraded heating systems)
Insurance	Landlord insurance, contents insurance, loss of rent cover	Personal home insurance
Letting agent fees	Rent collection, advertising, tenant find fees	Fees for buying or selling the property
Professional fees	Accountancy fees, legal fees for short leases or evictions	Legal fees for buying property, planning permission costs
Utilities and services	Council tax, water rates, business rates you pay (when property is empty or you're responsible)	Utilities paid by tenants
Mortgage interest	Interest portion only (special tax treatment applies)	Capital repayments on the mortgage
Travel costs	Mileage or vehicle costs for property-related journeys	Commuting, personal travel
Other running costs	Bank charges, stationery, phone calls for the business	Personal expenses, entertaining

Tip

Keep receipts for all expenses, even small ones. HMRC may ask to see evidence during a compliance check, and missing receipts can mean you lose the claim.

What you cannot claim

Capital improvements

If you improve or enhance the property beyond its original condition, that's a capital expense. You can't claim it against rental income, but you should keep records for Capital Gains Tax when you eventually sell the property.

Examples of capital expenses:

Extensions, loft conversions, or additional rooms
Installing a new bathroom or kitchen where there wasn't one before
Initial costs of furnishing a property when you first let it

There are some exceptions. For example, replacing domestic items (furniture, carpets, appliances) may qualify for special relief. See Capital and revenue expenses for the complete guide to what counts as a repair versus an improvement.

Personal expenses

If an expense has no connection to your property business, you cannot claim it. This includes:

Personal shopping, meals, or household costs
Clothing (even if worn to meet tenants)
Fines or penalties
Donations and gifts
Depreciation (an accounting concept, not a tax relief)

Costs covered by insurance or deposits

If your insurance pays for a repair, you can only claim the portion you paid yourself (for example, the excess). Similarly, if you keep a tenant's deposit to cover damages, you can only claim repair costs that exceed the amount you kept.

Special rules and grey areas

Mortgage interest and finance costs

You can only claim the interest portion of your mortgage payments, not the capital repayment part.

For residential property, finance costs are no longer deducted directly from rental income. Instead, HMRC calculates a 20% tax credit based on the interest you've paid. This restriction (often called Section 24) means higher-rate taxpayers typically pay more tax on rental income than they did before April 2020.

Commercial property is unaffected — you can still deduct 100% of finance costs directly.

Provestor handles this calculation automatically when you record mortgage interest. For detailed guidance on what counts as a finance cost and how the restriction works, see Mortgage interest and costs.

Replacing furniture, appliances, and carpets

If you replace a worn-out sofa, fridge, or carpet in a residential letting, you may be able to claim the cost under replacement of domestic items relief. But there's a catch: if you upgrade to a better item, you can only claim the cost of a like-for-like replacement, not the full cost of the upgraded version.

Example: You replace a £400 sofa with a £550 sofa bed. You can claim £400 (the cost of an equivalent replacement), not the full £550.

This relief only applies to residential lettings and only covers replacements, not initial purchases. See Capital and revenue expenses for the complete rules and how to record these in Provestor.

Mixed expenses (business and personal use)

If you use something for both your property business and personal purposes, you must split the cost and claim only the business portion.

Common examples:

A mobile phone used partly for tenant calls and partly for personal use
A laptop used for managing properties and for personal tasks
Vehicle costs if you use the same car for property visits and personal journeys

You need a reasonable method for calculating the split (for example, 60% business use based on time or mileage). Provestor lets you enter the personal use amount when recording the expense, and it automatically excludes that portion from your quarterly updates.

See Personal use and mixed expenses for detailed guidance on apportioning costs and what records to keep.

Repairs vs improvements

HMRC draws a clear line between repairs (allowable) and improvements (capital). A repair restores something to its original condition. An improvement makes it better than it was before.

Repairs (allowable):

Repainting and decorating
Replacing a broken boiler with a similar model
Fixing roof tiles after a storm
Replacing worn-out carpets with similar quality

Improvements (capital):

Installing central heating where there was none before
Adding an extension or extra room
Upgrading from a basic kitchen to a luxury one
Knocking through walls to create open-plan space

The grey area: If you replace something with the nearest modern equivalent — for example, replacing single-glazed windows with double-glazed ones as part of routine maintenance — HMRC may treat it as a repair if the improvement is incidental. But if you're doing significant enhancement work, the costs are likely capital.

See Capital and revenue expenses for worked examples and HMRC's guidance on the repair vs improvement test.

Recording expenses in Provestor

Provestor makes it straightforward to record expenses and ensures they're categorised correctly for HMRC.

How to add expenses:

In your business workspace, navigate to the Cash or Bank account where you paid the expense
Add the transaction (manually or by uploading a bank statement)
Categorise the expense using Provestor's AI suggestions or choose the category yourself
Link the expense to the relevant property
If the expense has personal use or includes a capital element, enter those amounts in the advanced options

Provestor automatically calculates the allowable portion and includes it in your quarterly updates. The disallowed portions (personal use, capital) are excluded from submissions but kept in your records.

See Capturing expenses for step-by-step guidance on adding and categorising transactions.

When to seek advice

Some situations are complex and may benefit from professional guidance:

Significant capital projects

Large-scale refurbishment where it's unclear what's repair vs improvement
Converting property from commercial to residential or vice versa
Major projects that span multiple tax years

Unusual expenses

Pre-letting expenses before you receive your first tenant
Costs for properties you're developing or renovating before first letting
Expenses where HMRC's rules are ambiguous or disputed

If in doubt, consult with a Provestor property tax expert. Getting advice upfront is usually cheaper than correcting mistakes later.

HMRC sources and further reading

HMRC provides detailed guidance on allowable expenses for property businesses:

Work out your rental income when you let property — HMRC's main guidance including allowable expenses, the wholly and exclusively test, and worked examples
Property rental income case studies — Real-world examples of common expense scenarios
Changes to tax relief for residential landlords — Section 24 mortgage interest restriction explained

Which income or expense category should I use? — Complete category-by-category guide to income and expenses
Personal use and mixed expenses — Wholly and exclusively test, apportioning costs
Capital and revenue expenses — Repairs vs improvements, replacement of domestic items relief
Mortgage interest and costs — Section 24 restriction, recording finance costs
Travel costs and mileage — HMRC mileage rates, claiming vehicle expenses
Capturing expenses — How to record expenses in Provestor