Tax-Deductible Expenses for UK Landlords

23 October 2024 | Tax

Landlords can claim several expenses related to their rental properties against their rental income, which helps to reduce their taxable profits. Here’s a breakdown of the typical expenses a landlord can claim:

1. Mortgage Interest

• Buy-to-let mortgage interest: Landlords can claim tax relief on the interest part of their mortgage repayments. As of recent tax changes, relief is given as a 20% tax credit rather than being deductible in full from rental income.

2. Maintenance and Repairs

• Repairs to the property: Expenses for maintaining the property in a good condition are deductible, such as fixing a leaky roof, replacing broken windows, or repainting.
• Non-improvement: Repairs are allowable, but improvements (such as upgrading a kitchen rather than just repairing it) are not.

3. Property Management Costs

• Letting agents' fees: Fees paid to letting agents for property management, tenant finding, or rent collection are tax-deductible.
• Legal fees: Costs related to evicting tenants or writing rental agreements are allowable.
• Accountancy fees: If an accountant prepares your rental accounts, those fees are also deductible.

4. Council Tax, Utilities, and Other Bills

• If the landlord is responsible for paying bills such as council tax, water rates, gas, and electricity, they can claim these as expenses.

5. Insurance

• Landlord insurance: The cost of insuring the building and contents (for furnished properties) is allowable, including specific landlord insurance policies covering risks like loss of rental income or damage.

6. Ground Rent and Service Charges

• If applicable, ground rent, service charges, or maintenance fees paid to maintain communal areas can be deducted.

7. Marketing Costs

• Expenses for advertising the property to potential tenants, such as online listings, agency costs, or newspaper adverts, are allowable.

8. Travel Expenses

• Travel for property management: If you need to visit your rental property, you can claim expenses for travel, such as fuel costs or public transport fares. If travel involves overnight stays, reasonable accommodation and subsistence costs are also deductible.

9. Replacement of Domestic Items

• Replacement of furnishings: Landlords of residential furnished properties can claim for the replacement of items like furniture, appliances, carpets, and curtains (this is known as the Replacement of Domestic Items relief).
• This does not apply to initial costs when furnishing a property for the first time.

11. Bad Debts

• If tenants fail to pay rent and the landlord cannot recover it, the bad debts may be claimed as an expense (as long as reasonable steps were taken to recover the debt).

12. Subscriptions and Training

• Subscriptions to property-related organizations, like the National Landlords Association (NLA), and relevant training to improve knowledge of property letting can also be claimed as expenses.

Non-Allowable Expenses

• Capital improvements: Any expense that enhances the property beyond its original state is considered a capital expense and not allowable as a deduction against rental income. This includes things like extensions or substantial refurbishments.
• Personal expenses: Any expenses not related to the rental property, such as personal travel, are not deductible.

Records

It is crucial for landlords to keep detailed and accurate records of their expenses and income to provide proof for tax returns and claims. HMRC may ask for documentation to back up any claims.