What rental income expenses can I deduct from tax in the UK 2026?

Full answer

Rental income is taxable under the property income rules in Part 3 ITTOIA 2005. Landlords can deduct "wholly and exclusively" incurred expenses from their rental income before calculating the taxable profit. Allowable expenses -- Letting agent fees and management charges -- Repairs and maintenance: replacing like-for-like (painting, fixing gutters, repairing appliances, replacing a broken boiler with equivalent spec) -- but NOT improvements (installing a new extension, upgrading a kitchen beyond like-for-like) -- Buildings and contents insurance premiums for the let property -- Ground rent and service charge payments (on leasehold properties) -- Utility bills if paid by the landlord rather than the tenant (gas, electricity, water, internet) -- Council tax if paid by the landlord during void periods -- Accountant fees for preparing rental accounts -- Legal fees for new leases not exceeding one year, or for renewing leases for under 50 years -- Advertising costs for finding tenants -- Mileage costs for visiting the property (at approved rates: 45p/mile for first 10,000 miles) Capital expenditure -- NOT allowable Improvements are capital expenditure and are not deductible from rental income. They can reduce a capital gain when the property is sold. Examples: adding a conservatory, converting a loft, replacing single-glazed windows with double-glazing beyond like-for-like repair. Mortgage interest -- Section 24 Since April 2020 landlords who are individuals (not companies) cannot deduct mortgage interest as an expense. Instead they receive a 20% basic-rate tax credit on their finance costs. This means: -- Higher-rate taxpayer paying GBP 10,000/year mortgage interest: previously saved GBP 4,000 in tax; now saves only GBP 2,000 -- The finance costs restriction does NOT apply to companies owning buy-to-let property Property allowance Landlords with gross rental income below GBP 1,000 can use the Property Allowance (full exemption). Those with higher income can use the GBP 1,000 as an alternative to claiming actual expenses -- useful only if actual expenses are very low. Replacement of domestic items (RDI) Landlords in unfurnished and furnished residential lets can claim relief for replacing domestic items (beds, sofas, white goods, carpets) on a like-for-like basis. This replaced the old wear-and-tear allowance for furnished lets from April 2016.