Are Landlord Licensing Fees Tax Deductible in 2026/27?

Every year, landlords pay hundreds or thousands of pounds in licensing fees to their local councils -- mandatory HMO licences, selective licensing schemes and additional licensing in specific wards. The good news is that all of these fees are allowable revenue expenses, reducing your taxable rental income pound for pound.

Understanding what you can and cannot claim matters beyond licensing alone. It covers the full spectrum of landlord costs, from letting agent fees to deposit protection charges, and requires knowing where the boundary sits between revenue expenditure (deductible now) and capital expenditure (deductible later against CGT).

The Tax Treatment of Licensing Fees

HMRC's position is clear: landlord licensing fees are revenue expenditure, not capital expenditure. This distinction determines when and how you claim relief:

• Revenue expenditure is deducted from rental income in the year it is paid, reducing your income tax bill immediately
• Capital expenditure cannot be deducted from rental income; it instead reduces the capital gain when you eventually sell the property

Licensing fees are revenue because they do not create a lasting capital asset or improve the property. They are the ongoing cost of being permitted to operate the property as a rental unit. When the licence expires, it has no remaining value -- you pay again for the next period.

Types of landlord licence and typical costs in 2026/27:

All three are deductible in the year paid.

Section 24: How Mortgage Costs Work in 2026/27

Before covering the full expense list, individual landlords must understand that mortgage interest is no longer a straightforward deduction. Under Section 24 (fully phased in since 2020/21):

• You cannot deduct mortgage interest from rental income as an expense
• Instead, you receive a 20% tax credit equal to your annual finance costs
• The credit is applied after your tax on rental profits is calculated

This means your taxable rental profit includes the full rental income minus all other allowable expenses -- but not mortgage interest. After calculating your tax on that profit, you subtract the Section 24 credit (20% of interest paid).

For basic rate taxpayers, the effect is neutral. For higher rate taxpayers, it is costly: the credit is worth 20% but the foregone deduction was worth 40%.

Complete List of Allowable Revenue Expenses

Letting and management:

• Letting agent tenant-find fees
• Full management fees (typically 8% to 15% of monthly rent)
• Tenancy renewal fees
• Inventory fees and property inspection costs

Licensing and compliance:

• Mandatory HMO licence fees
• Additional HMO licence fees
• Selective licence fees
• Gas safety certificate (annual CP12)
• Electrical Installation Condition Report (EICR)
• Portable Appliance Testing (PAT)
• Fire safety and CO alarm maintenance

Insurance:

• Buildings insurance
• Contents insurance (furnished lets)
• Landlord liability insurance
• Rent guarantee insurance

Property maintenance:

• Repairs to maintain existing condition (not improvements)
• Emergency call-out costs
• Cleaning between tenancies
• Gardening and outdoor maintenance
• Repainting existing decoration

Professional fees:

• Accountancy fees for rental accounts
• Legal fees for tenant disputes, rent arrears or possession proceedings
• Solicitor costs for preparing tenancy agreements (ongoing, not initial conveyance)

Running costs (if paid by landlord):

• Council tax during void periods
• Utility bills in HMOs where landlord pays
• Broadband in HMOs

Deposit compliance:

• TDS, DPS or MyDeposits membership fees
• Per-tenancy protection charges

Furniture replacement:

• Replacement of Domestic Items Relief: cost of replacing worn items (beds, sofas, white goods, curtains) at like-for-like replacement cost -- not original purchase, not upgrades

What Is NOT Deductible Against Rental Income

These costs cannot be claimed against income tax on rental profits:

Capital costs (claim against CGT on sale instead):

• Purchase price of the property
• SDLT paid on purchase
• Solicitor and surveyor fees on purchase
• Capital improvements (extensions, loft conversions, adding central heating where none existed, significant bathroom or kitchen upgrades beyond like-for-like)

Personal costs:

• Your own time managing the property
• Commuting or travel costs to view properties you did not buy

Mortgage capital:

• Repayments of the loan principal (only interest is relevant and only as a tax credit)

Revenue vs Capital: The Key Distinction

The most commonly misunderstood boundary is between repairs (revenue, deductible now) and improvements (capital, deductible only against CGT on sale):

• Repair: Restoring something to its previous condition -- a new roof on existing structure, repairing a broken boiler, replacing a single damaged window
• Improvement: Creating something better than what was there before -- adding a conservatory, replacing a basic bathroom with a premium spa bathroom, installing double glazing throughout a property that had single glazing

When a property is purchased in a dilapidated state and then repaired before letting, HMRC may argue that some or all early repairs are capital (integral to making the property fit for letting). Document your intentions at each stage.

Timing of Deductions

Expenses are deductible in the tax year paid, not the period to which they relate. Most individual landlords use cash basis accounting, meaning deductions follow actual payment dates.

If you pay a 5-year HMO licence fee in April 2026 covering 2026 to 2031, cash basis accounting allows you to deduct the full amount in 2026/27 (the year of payment). Accruals accounting would spread it over the 5 years, but most smaller landlords are not required to use accruals.

Where to Claim on Self Assessment

Use the SA105 (UK Property) supplementary pages. All rental properties across your portfolio are combined into one set of SA105 pages -- not one per property.

Key expense categories on SA105:

• Box 24: Total rents received
• Box 28: Repairs, maintenance and renewals
• Box 29: Finance charges (for accruals basis users -- note: Section 24 credit is calculated separately via boxes in the finance charges section)
• Box 30: Legal, management and other professional fees
• Box 31: Cost of services provided, including wages
• Box 32: Other allowable property expenses (licensing fees go here)

From April 2026, if your gross rental income exceeds £50,000, MTD ITSA requires digital records and quarterly submissions. The annual final declaration replaces the SA105 in future years for MTD users.

Use our landlord tax calculator at calchub.uk to estimate how your allowable expenses reduce your 2026/27 rental income tax bill.