Answers · UK 2025/26
Can landlords deduct licensing fees from their rental income tax?
Yes -- HMO licensing fees, selective licensing fees, and mandatory licensing fees paid to the local council are all allowable revenue expenses that can be deducted from rental income before calculating tax. They are not capital costs and do not need to be spread over the licence period; they are typically deducted in full in the year of payment under cash basis accounting.
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Landlords subject to licensing requirements can deduct the associated fees as revenue expenses against their rental income, reducing their taxable profit. **Types of deductible licensing fees** - **Mandatory HMO licence fees**: for HMOs with 5+ tenants over 3+ storeys sharing facilities - **Additional HMO licensing**: council schemes extending licensing to smaller HMOs - **Selective licensing**: blanket schemes in designated local areas covering all private rentals - **Renewal fees**: when an existing licence expires and must be renewed All of these are allowable under HMRC's Property Income Manual as they are incurred wholly and exclusively for the purposes of the rental business. **Timing of deduction** Under cash basis (now the default since April 2024): - Deduct in full in the year you pay the fee - No need to apportion over the 5-year licence term Under accruals basis: - Strictly speaking the fee relates to the period of the licence, so some accountants spread it - In practice most HMRC officers accept deduction in full in the year of payment for licence fees **What else can landlords deduct?** Licensing fees are part of a wider range of allowable expenses: - Letting agent and management fees - Property repairs and maintenance (not improvements) - Buildings and contents insurance - Mortgage interest (subject to the Section 24 restriction -- 20% tax credit only) - Accountancy fees - Advertising for tenants - Ground rent and service charges (if paid by landlord) - Utility bills (if landlord pays) - Travel to the property for management purposes **What cannot be deducted?** - Capital improvements (e.g. adding a new bathroom, loft conversion) -- these may attract capital allowances or reduce CGT on disposal - Fines or penalties (e.g. for letting an unlicensed HMO -- HMRC does not allow deduction of fines) - Personal costs unrelated to the rental business **Record keeping** Retain the licence certificate and payment receipts. Record the expense on your Self Assessment return under allowable expenses for the relevant rental property.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.