Which Income or Expense Category Should I Use?

When recording transactions in Provestor, you'll categorise each one so it's reported correctly to HMRC. This guide explains what belongs in each income and expense category based on HMRC's requirements.

If you're unsure whether an expense is allowable at all, see Allowable expenses for detailed guidance on what you can and cannot claim.

Income Categories

Rental income

Rental income is the rent you receive from tenants under a tenancy, lease, or licence agreement. This includes payments for the use of the property itself and any additional charges for services or furniture.

What to include:

  • Regular rent payments from residential or commercial tenants
  • Rent from furnished or unfurnished properties
  • Payments for furniture or appliances supplied with the property
  • Charges for services provided to tenants (cleaning, utilities, heating)
  • Income from short-term lets or holiday accommodation
  • Any service charges paid by tenants

What to exclude:

  • Ground rents you receive from others (use Other income instead)
  • Premiums for granting a lease (separate category)
  • Local authority grants (use Other income instead)
  • One-off payments that aren't regular rent

HMRC defines rental income as rent from tenants plus any payments for furniture or services provided. See HMRC's guidance on rental income for the complete definition.

Pro Tip Income from furnished holiday lettings was historically treated differently for tax purposes, but the Furnished Holiday Lettings (FHL) classification is being abolished from the 2025/26 tax year onwards. All property letting income is now categorised as rental income.

Other income

Other income includes property-related receipts that aren't regular rent from tenants. These are typically one-off payments or income from unusual uses of your property.

What to include:

  • Ground rents you receive from tenants
  • Income from filming or events held at your property
  • Payments for sporting rights (hunting, fishing, shooting)
  • Wayleaves (payments for access rights, such as utility companies crossing your land)
  • Income from caravans or houseboats at fixed locations
  • Local authority grants towards the cost of repairs

What to exclude:

  • Regular rent payments (use Rental income instead)
  • Premiums for granting a lease (separate category)
  • Reverse premiums or inducements (separate category)

Rent a Room rents received

Rent a Room income is rent you receive from letting furnished rooms in your main home. This category only applies if you live in the property yourself and let out spare rooms to lodgers.

What to include:

  • Rent from lodgers in your main residence
  • Payments for furnished rooms in your home

What to exclude:

  • Income from whole-property lets (use Rental income instead)
  • Income from a property where you don't live (use Rental income instead)
  • Income from unfurnished rooms (doesn't qualify for Rent a Room relief)

If your total Rent a Room income is £7,500 or less (£3,750 if let jointly), you can claim full relief and won't pay tax on it. If your income exceeds this, you can choose to pay tax on the excess or calculate profit in the usual way. See HMRC's Rent a Room guidance for details.

Tax taken off income

This category records tax that's been deducted from your rental income at source, typically under the Non-Resident Landlord Scheme. It's not income itself — it's tax already paid on your behalf that you need to declare.

What to include:

  • Tax deducted by letting agents under the Non-Resident Landlord Scheme
  • Tax withheld from rental income paid to you

What to exclude:

  • Rental income amounts (record the gross amount in Rental income)
  • Property expenses
  • Tax you've paid directly to HMRC (such as payments on account)

Premiums for the grant of a lease

A premium is a lump sum you receive from a tenant for granting them a lease. If the lease is for 50 years or less, part of the premium is treated as income (the rest is capital).

What to include:

  • Premiums received for granting leases of up to 50 years
  • The income portion only (HMRC provides a calculation to work out how much)

What to exclude:

  • Premiums for leases over 50 years (not treated as income)
  • Regular rent payments (use Rental income instead)

HMRC's guidance includes a worksheet for calculating the income portion of a lease premium. The formula accounts for the length of the lease to determine how much is taxable income.

Reverse premiums and inducements

A reverse premium is a payment or benefit you receive as an incentive to take on a lease or interest in a property. This is the opposite of a normal premium — you're being paid to become a tenant or take on a property obligation.

What to include:

  • Payments received to encourage you to take on a lease
  • Inducements from landlords to enter into agreements
  • Benefits received as incentives for property occupation

What to exclude:

  • Premiums you pay to landlords (these may be partially deductible as expenses if subletting)
  • Regular rent or service charges

Expense Categories

Rent, rates, insurance and ground rents

This category covers the running costs of maintaining your rental property, including payments to authorities, insurance policies, and rent you pay on leased property.

What to include:

  • Rent you pay if you lease a property that you then let to tenants
  • Business rates, water rates, and Council Tax
  • Property insurance and contents insurance
  • Insurance against loss of rents
  • Ground rents you pay

What to exclude:

  • Expenses covered by insurance claims you've made (if you claimed under your policy, don't also claim the expense)
  • Personal use portions (if you use part of the property yourself, exclude that proportion)

Property repairs and maintenance

Repairs restore your property to its original condition without improving or adding to it. This category includes the cost of materials and labour for repair work, plus smaller items you'd typically buy from a DIY shop.

What to include:

  • Exterior and interior painting, decorating
  • Damp treatment, stone cleaning, roof repairs
  • Repairing or replacing broken appliances, furniture, fixtures
  • Replacing parts like locks, handles, tiles
  • Tools, decorating supplies, hardware, padlocks
  • Repairs to machinery or equipment supplied with the property

What to exclude:

  • Improvements or upgrades (these are capital expenses, not allowable as repairs)
  • Initial costs of furnishing or fitting out a property (capital)
  • Replacing items with better or more expensive versions (the improvement element is capital)

HMRC distinguishes between repairs (allowable) and improvements (capital). Repairs restore something to its original condition. Improvements make it better than it was before. If you replace something with an upgraded version, only the cost of a like-for-like replacement is allowable — the extra cost for the upgrade is capital.

Pro Tip If you're not sure whether work counts as a repair or an improvement, HMRC's guidance on repairs and renewals provides examples.

Costs of services provided, including wages

This category covers services you provide directly to tenants as part of the rental arrangement, including paying staff to deliver those services.

What to include:

  • Cleaning of communal areas or individual properties
  • Gardening and grounds maintenance
  • Communal utilities (heating, hot water, electricity)
  • Wages paid to staff who support the property or provide services
  • Costs of providing services included in the rent

What to exclude:

  • Services not provided to tenants (such as your own household costs)
  • Repairs and maintenance (separate category)

If you receive income for providing these services, that income should be included in Rental income.

Professional fees for managing your property business or dealing with tenant-related legal matters are allowable. Fees related to acquiring property or long-term capital arrangements are not.

What to include:

  • Letting agent fees for rent collection, advertising, and administration
  • Accountancy fees for preparing rental accounts or tax returns
  • Legal fees for renewing a lease (if the lease is for less than 50 years)
  • Legal fees for evicting an unsatisfactory tenant
  • Costs of appealing against a compulsory purchase order

What to exclude:

  • Costs for the first letting or subletting of a property for more than a year
  • Costs for agreeing and paying a premium on renewal of a lease
  • Fees for planning permission or registration of title when purchasing property
  • Legal fees for buying or selling property (capital)

Travel costs

You can claim travel costs incurred wholly and exclusively for your property business. The costs must be for business purposes only — any private travel element must be excluded.

What to include:

  • Travel to carry out repairs or maintenance
  • Visits to meet tenants or prospective tenants
  • Travel to oversee letting agents or property managers
  • Journeys to inspect properties or deal with emergencies

What to exclude:

  • Commuting from home to an office (if you have one)
  • Any private or personal travel
  • Travel that's not directly related to the property business

You can claim either actual vehicle costs (apportioned for business use) or HMRC's flat rate mileage allowance (45p per mile for first 10,000 miles, 25p thereafter).

See Travel costs and mileage for detailed guidance on claiming vehicle expenses, HMRC mileage rates, and what records to keep.

Other allowable property expenses

This is a catch-all category for allowable expenses that don't fit elsewhere. Use it for miscellaneous costs clearly related to your property business.

What to include:

  • Stationery, postage, printing
  • Phone costs for property-related calls
  • Bank charges on property business accounts
  • Part of a premium paid to a landlord if you're subletting
  • Subscriptions to professional or trade bodies
  • Software subscriptions for property management

What to exclude:

  • Expenses that belong in specific categories above
  • Personal costs not related to the property business
  • Capital expenditure

Pro Tip Provestor's AI will suggest more specific categories where possible. Only use "Other allowable property expenses" when a transaction genuinely doesn't fit any other category.

Rent a Room exempt amount

If you receive income under the Rent a Room scheme and your total receipts exceed £7,500 (£3,750 if let jointly), you can choose to pay tax on the excess without deducting any expenses. This category records the exempt amount you're claiming.

What to include:

  • £7,500 exempt amount (or £3,750 if let jointly)

What to exclude:

  • Actual expenses (you cannot claim both the exempt amount and actual expenses)

If you claim the Rent a Room relief, you cannot also deduct expenses or claim capital allowances on that income. You must choose one approach or the other.

Mortgages and property finance costs

Finance costs include mortgage interest and loan arrangement fees for borrowing used to buy, improve, or maintain rental property. You can only claim the interest or finance element — capital repayments are not allowable.

What to include:

  • Mortgage interest on loans to buy rental property
  • Mortgage interest on loans to improve or maintain rental property
  • Alternative finance payments (such as Islamic finance arrangements)
  • Loan arrangement fees and related costs of securing finance

What to exclude:

  • Capital repayments (the portion of your mortgage payment that pays off the loan itself)
  • Interest on borrowing for personal use
  • Finance costs for property not used in your rental business

Important: Residential property finance costs are no longer deducted from rental income. Instead, they're used to calculate a tax credit at the basic rate. This restriction doesn't apply to finance costs for commercial property. Provestor handles this calculation automatically when you submit your updates.

See Mortgage interest and costs for detailed guidance on how residential finance costs are treated.

Unused residential property finance costs brought forward

If you had residential property finance costs in previous years that exceeded the tax relief available, you can carry the unused amount forward to future years. This category records those brought-forward amounts.

What to include:

  • Unused residential finance costs from earlier tax years
  • Amounts carried forward under the finance cost restriction rules

What to exclude:

  • Current year finance costs (use Mortgages and property finance costs instead)

Disallowed Expenses

Disallowed expenses

Some expenses cannot be claimed for tax purposes, even if they're genuinely related to your property business. There is no need to record these items in Provestor, but you may choose to for your own records. By selecting the disallowed expenses category, these amounts will not be submitted to HMRC or included in your tax calculation.

Disallowed expenses include:

  • Income tax, capital gains tax, or inheritance tax payments
  • VAT paid to HMRC
  • Personal expenses unrelated to the property business
  • Fines and penalties
  • Entertaining
  • Donations and gifts
  • Depreciation (accounting concept, not a tax relief)

For HMRC's complete guidance on rental income and expenses, see Work out your rental income when you let property.

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