UK Rental Income Allowable Expenses: Complete Guide 2026

Understanding which expenses you can deduct from your rental income is one of the most important skills for any UK landlord. Getting it wrong can mean paying too much tax -- or too little and facing HMRC penalties. This guide covers every allowable expense for the 2026 tax year, including the often-misunderstood mortgage interest restriction.

What Are Allowable Expenses?

Allowable expenses are costs you incur wholly and exclusively in renting out your property. You deduct these from your rental income to arrive at your taxable profit. HMRC requires that expenses are for the letting business -- not personal use, not capital improvements, and not costs relating to buying the property.

The key principle is "wholly and exclusively": if an expense has a dual purpose (partly personal, partly business), you can only claim the business portion.

Fully Allowable Expenses

Letting Agent Fees

If you use a letting agent to find tenants, manage the property, or both, their fees are fully deductible. This includes:

• Tenant-find fees (typically 6--12% of one month's rent)
• Full management fees (typically 10--15% of monthly rent)
• Renewal fees charged when a tenancy is extended
• Inventory clerk fees arranged through the agent

Legal and Professional Fees

Legal fees for lettings are deductible, but with an important distinction. Costs directly related to the letting -- such as drafting a tenancy agreement, serving a Section 21 or Section 8 notice, or recovering rent arrears through the courts -- are allowable.

However, legal costs related to buying or selling the property are capital costs and cannot be deducted from rental income.

Accountancy fees for preparing your rental income tax return are also fully deductible.

Insurance

Building and contents insurance specifically for the rental property is a fully allowable expense. This includes:

• Buildings insurance
• Contents insurance (for furnished lets)
• Landlord liability insurance
• Rent guarantee insurance
• Legal expenses insurance policies for landlords

Maintenance and Repairs

This is where many landlords make mistakes. The rule is: repairs are allowable, improvements are not.

Allowable repairs include:

• Fixing a broken boiler or replacing a like-for-like boiler
• Repainting walls to the same standard
• Repairing a damaged roof (but not upgrading it)
• Fixing plumbing leaks
• Replacing a broken window with a similar standard window
• Garden maintenance (mowing, pruning) if the tenancy agreement requires it

Not allowable as repairs (these are capital improvements):

• Converting a loft or basement into habitable space
• Adding an extension
• Installing central heating where there was none before
• Upgrading a kitchen or bathroom to a higher specification
• Double-glazing where only single-glazing existed

Capital improvements are not lost -- they can be used to reduce Capital Gains Tax when you eventually sell the property, by increasing your base cost.

Ground Rent and Service Charges

If you own a leasehold property, ground rent paid to the freeholder and service charges for the upkeep of common areas are allowable expenses.

Council Tax and Utilities

If you pay council tax and utility bills on behalf of tenants (common in HMOs or during void periods), these costs are deductible. Be careful with void periods -- only costs genuinely incurred for the letting business are allowable.

Advertising Costs

The cost of advertising your property for rent -- whether on Rightmove, Zoopla, local newspapers, or via social media -- is fully deductible.

Professional Subscriptions and Training

Membership of a recognised landlord association (such as the National Residential Landlords Association) is deductible. Costs for training directly related to your letting activities may also qualify.

Other Running Costs

• Stationery and postage related to the letting
• Mileage for visiting the property (at HMRC approved rates, if you keep a mileage log)
• Telephone costs where directly related to the property (apportioned if mixed use)

The Mortgage Interest Restriction -- Section 24

Section 24 of the Finance Act 2015 phased out full mortgage interest relief and replaced it with a 20% tax credit. Here is what this means in practice:

Before Section 24, if you earned £20,000 rental income and paid £10,000 in mortgage interest, you were taxed on £10,000 profit. If you were a basic rate taxpayer, you paid £2,000 in tax.

Under Section 24, you are taxed on the full £20,000 rental income (minus other allowable expenses). If you have no other expenses, that means tax on £20,000. You then receive a credit equal to 20% of your finance costs: 20% of £10,000 = £2,000.

For basic rate taxpayers, the net result is the same. But for higher-rate taxpayers, the impact is significant. A 40% taxpayer would pay £8,000 tax on £20,000 income, then receive the £2,000 credit -- leaving a tax bill of £6,000 instead of the £4,000 they would have paid under the old rules.

Finance costs covered by Section 24 include:

• Mortgage interest (not capital repayments)
• Loan arrangement fees (spread over the loan term)
• Interest on loans to buy furnishings

What Is NOT Allowable

These costs cannot be deducted from rental income:

• Mortgage capital repayments: Only the interest element qualifies for the 20% credit -- not the capital you are repaying
• Initial furnishing costs: The cost of furnishing a property for the first time is not deductible (though replacements are -- see below)
• Personal expenses: Costs not exclusively related to the letting
• Depreciation: You cannot deduct depreciation of the property itself
• The property purchase costs: Stamp duty, solicitor fees for buying -- these are capital costs

Replacement of Domestic Items Relief

The old Wear and Tear Allowance (which allowed a 10% flat deduction for furnished lets) was abolished in April 2016. In its place, Replacement of Domestic Items Relief lets you deduct the cost of replacing items in furnished and unfurnished properties.

You can claim when you replace:

• Furniture (sofas, beds, wardrobes)
• Appliances (washing machines, fridges)
• Carpets and flooring
• Curtains and blinds
• Crockery and cutlery

The key rules are:

• You can only claim for the replacement, not the initial purchase
• If you upgrade (e.g., replace a standard fridge with an American-style model), you can only deduct the cost of a like-for-like equivalent
• The old item must have been disposed of

The Property Income Allowance

If your total gross rental income (before any expenses) is £1,000 or less per year, you do not need to declare it to HMRC at all.

If your income is above £1,000, you can choose to deduct the £1,000 allowance instead of your actual expenses. This is useful if your actual expenses are less than £1,000 -- or if you want to simplify your records.

You cannot claim both the property income allowance and actual expenses for the same property. Choose whichever is more beneficial.

Furnished vs Unfurnished Lets

The allowable expenses are broadly the same for furnished and unfurnished lets. The main difference is that Replacement of Domestic Items Relief is more relevant for furnished lets, where you are replacing furniture and appliances.

For unfurnished lets, you can still claim for replacing carpets, curtains, and any appliances you do provide.

Mixed Use Properties

If part of your property is used for personal purposes (for example, you live in part and rent out part), you can only claim a proportion of expenses relating to the rental portion. You will need to apportion costs on a reasonable basis -- usually by floor area or the number of rooms.

Using a CalcLink to Plan Your Tax

Frequently Asked Questions

Can I deduct the cost of travelling to my rental property? Yes, mileage to visit your property for legitimate business reasons (inspections, repairs) can be claimed at HMRC approved rates (currently 45p per mile for the first 10,000 miles). Keep a mileage log.

Can I deduct my mortgage repayments? No. Only the interest element of your mortgage qualifies -- and even that is restricted to a 20% tax credit under Section 24, not a full deduction.

I paid to have the property decorated before letting it for the first time. Can I claim this? The initial decoration before your first letting is generally treated as a capital cost, not a deductible expense. However, subsequent redecoration between tenancies is an allowable repair.

Can I claim for a new kitchen? A like-for-like kitchen replacement (same standard) is an allowable repair. Upgrading to a significantly better kitchen is a capital improvement and cannot be expensed -- but it will reduce CGT when you sell.

Can I deduct the cost of a home office for managing my properties? Potentially, if you work from home on your letting business. You can claim a proportion of home costs based on usage -- but HMRC scrutinises this and the amount is often small.

What records do I need to keep? Keep receipts and invoices for all expenses. HMRC recommends keeping records for at least 5 years after the 31 January self-assessment deadline for the relevant tax year.

Can I deduct legal fees for evicting a tenant? Yes. Legal fees for recovering possession of your property -- whether via Section 21 (no-fault) or Section 8 (fault) -- are allowable expenses related to the letting business.

I rent out a room in my own home. Do these rules apply? If you use the Rent a Room Scheme (up to £7,500 tax-free), different rules apply. You cannot claim allowable expenses under Rent a Room -- it is one or the other.

Can I claim for bad debts (unpaid rent)? If a tenant owes rent and you have written it off as irrecoverable, you can claim a deduction for the bad debt in the year you write it off.

Does it matter if I am a higher-rate or additional-rate taxpayer? Yes significantly for mortgage interest. Under Section 24, higher-rate taxpayers only receive a 20% credit -- not 40% or 45% relief. This is one reason some landlords have considered transferring properties to a limited company, where full mortgage interest deduction is still available (though other costs and risks apply).