What capital allowances can UK landlords claim on a rental property?

Full answer

Capital allowances allow businesses to deduct the cost of capital assets (plant, machinery, equipment) from taxable profits. However, the rules for residential landlords are significantly restricted compared to commercial property or business use. Residential property landlords: Capital allowances on plant and machinery are NOT available for the residential letting business itself. This means you cannot claim Annual Investment Allowance (AIA) or writing-down allowances on items like white goods, furniture, boilers, or carpets in residential rental properties. Instead, residential landlords have access to Replacement of Domestic Items Relief (introduced in 2016, replacing the old 10% wear and tear allowance). This allows you to deduct the cost of replacing a domestic item (such as a washing machine, sofa, curtains, or crockery) when you replace it with a like-for-like equivalent. The relief covers the replacement cost, not the original cost. You cannot claim on the initial purchase. Permitted items: white goods, furniture, furnishings, floor coverings, kitchenware, curtains and blinds. Non-permitted items: fixtures that are integral to the building (boiler, central heating, wiring) -- these are treated as repairs if replaced like-for-like, deductible as revenue expenditure. Furnished holiday lets (FHLs): before April 2025, FHL businesses could claim capital allowances as if they were trading businesses. From April 2025, the FHL regime was abolished and FHL properties are now taxed the same as standard residential lets, losing access to capital allowances. Commercial property landlords: can claim AIA (up to GBP1 million per year), writing-down allowances at 18% (main pool) or 6% (special rate pool), and Structures and Buildings Allowance (SBA) at 3% per year on construction costs. The type of property and its use therefore has a major impact on the tax treatment of capital expenditure.

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