New-Build Snagging Costs: Are They Tax-Deductible for Landlords in 2026/27?
Fixing snagging defects on a newly built rental property raises a repairs-vs-improvement question for tax. How HMRC's capital vs revenue distinction applies to snagging costs in 2026/27.
Quick answer
The first question for a landlord facing snagging issues on a new-build rental isn't tax โ it's whether the developer's warranty should be covering the fix. Where a landlord genuinely does pay out of pocket, the tax treatment turns on the familiar repairs-vs-improvements distinction: a repair restoring a defect is usually deductible against rental income, while an upgrade beyond the original specification is a capital cost instead.
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New-build properties typically come with a structural warranty (commonly an NHBC-style 10-year cover), with the builder directly responsible for defects reported within the first two years. Genuine snagging โ cracked plaster, ill-fitting doors, faulty fixtures present from construction โ should usually be the developer's cost to fix, meaning no landlord expense, and therefore no tax question, arises in the first place if the claim is made and honoured.
Repair vs improvement, if the landlord pays
Where a landlord does end up paying (perhaps because a specific item falls outside warranty cover, or speed matters more than pursuing a claim), HMRC's long-standing distinction applies:
- Repair โ restoring something to the condition it was meant to be in when built or acquired. Generally deductible against rental income in the year the cost is incurred.
- Improvement โ adding something better or different from the original specification (for example, upgrading a standard fitted kitchen to a significantly higher-spec one while also fixing a snagging fault with it). This is a capital cost, not immediately deductible against rental income.
Costs before the property is first let
If snagging work happens while the property is empty, before the first tenancy begins, the costs can sometimes still qualify as deductible pre-letting expenses โ provided they're the kind of cost that would have been a normal revenue repair once the letting business was underway, and are incurred reasonably close to the start of letting (commonly accepted as within about seven years, though the closer to the letting start date the clearer the position).
Capital treatment and future CGT relief
If a cost is genuinely a capital improvement rather than a repair, it isn't lost for tax purposes โ it can be added to the property's acquisition cost, reducing the eventual Capital Gains Tax bill when the property is sold, rather than reducing rental income tax now.
Bottom line
Pursue the developer's warranty first for genuine snagging defects โ most shouldn't cost the landlord anything. Where the landlord does pay, keep clear records distinguishing repairs (immediately deductible) from improvements (a capital cost, relieved later against CGT).
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Frequently asked questions
Can a landlord deduct snagging repair costs from rental income?
Generally yes, if the snagging items are genuine defects present when the property was built and are fixed under the builder's warranty or NHBC-style cover shortly after purchase โ but if the landlord pays for the fixes out of pocket (rather than the builder covering them), the tax treatment depends on whether the work is a repair or a capital improvement.
What's the difference between a repair and an improvement for tax purposes?
A repair restores something to its original condition (fixing a cracked plaster wall, correcting a sticking door) and is generally deductible against rental income in the year incurred. An improvement adds something new or better than what existed before (installing a feature that wasn't there originally) and is a capital cost, not immediately deductible against rental income.
Are snagging costs incurred before the property is first let deductible?
Costs incurred before a rental business begins โ for example, fixing snagging issues while a newly built property is empty and not yet let โ may be treated as pre-letting expenses, which can sometimes still be deducted against the first accounting period's rental income if incurred shortly before letting starts and would otherwise have qualified as revenue expenses.
Should the developer be paying for snagging under warranty instead?
In most cases, yes โ genuine construction defects identified within the warranty period (commonly covered by NHBC or an equivalent 10-year new-build warranty for the first two years by the builder directly) should be fixed by the developer at no cost to the landlord, meaning there's often no tax question at all because no deductible expense has actually been incurred.
Does claiming snagging costs affect Capital Gains Tax when the property is eventually sold?
If a cost is treated as a capital improvement rather than a revenue repair, it can be added to the property's base cost for Capital Gains Tax purposes when eventually sold, effectively giving relief later rather than against current rental income โ worth tracking carefully regardless of which category applies.
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