What Counts as a Legitimate Landlord Expense?

What Counts as a Legitimate Landlord Expense? A Practical Breakdown

Hello again, property enthusiasts! As your resident Chartered Accountant, I often see landlords leaving money on the table—or worse, trying to claim for a “business trip” that looks suspiciously like a family holiday to the Algarve.

In the 2025/26 tax year, with the cost of living still biting and interest rates keeping us on our toes, maximizing your allowable expenses is the smartest way to protect your rental profits.

The golden rule from HMRC is that an expense must be “wholly and exclusively” for your property business. Let’s break down what that actually looks like in the real world.

1. Repairs vs. Capital Improvements: The Great Debate

This is the #1 area where landlords get into hot water.

• Repairs (Revenue Expenses): These are deductible from your rental income immediately. They restore the property to its original state.

• Improvements (Capital Expenditure): These are not deductible from your annual income tax. Instead, you keep the receipts to offset against Capital Gains Tax when you eventually sell the property.

Real-World Scenario: The Kitchen Upgrade

• The Repair: You replace three broken cabinet doors with similar ones. Verdict: Allowable expense.

• The Improvement: You rip out a functional 1990s kitchen and install a granite-topped luxury suite with an island. Verdict: Capital expenditure (save the receipt for the sale!).

2. Replacing Domestic Items

If you let a furnished or part-furnished property, you can claim Replacement of Domestic Items Relief. This covers:

• Beds and sofas

• Curtains and carpets

• Fridges, washing machines, and kettles

The Catch: You can only claim for a “like-for-like” replacement. If you replace a basic £300 washing machine with a £1,200 smart washer that folds the clothes for you, you can only claim the cost of a basic equivalent!

3. Mileage and Travel: Don’t Guess!

You can claim for travel to your rental property for inspections, repairs, or meeting tenants.

• The HMRC Approved Rates: For 2025/26, these remain at 45p per mile for the first 10,000 miles and 25p thereafter.

• The Warning: You cannot claim for the commute from your house to your “office” if that office is the rental property itself.

4. The “Home Office” Allowance

Do you spend hours at your kitchen table managing tenancies, vetting tenants, and chasing arrears? You can claim a portion of your home bills.

• The Easy Way: Use HMRC’s “Simplified Expenses” flat rate if you work more than 25 hours a month on your business.

• The Pro Way: Calculate the actual proportion of your heating, lighting, and broadband based on the number of rooms in your house and time spent working. (Ask me for a spreadsheet template for this!)

5. Professional Fees (The “Keep Me Safe” Costs)

HMRC essentially views these as the cost of doing business properly. These are generally 100% deductible:

• Letting Agent Fees: Management, finders’ fees, and inventory costs.

• Accountancy Fees: My fees for preparing your rental accounts and MTD filings.

• Legal Fees: For renewing a lease (less than 7 years) or dealing with evictions. Note: Legal fees for buying the property are Capital Expenditure.

• Insurance: Specialist Landlord Insurance and Public Liability.

6. Summary Table: Can I Claim It?

Looking Ahead to 2026/27

With Making Tax Digital starting in April 2026 for those earning over £50k, keeping these receipts organized isn’t just a “good idea”—it’s about to become a legal requirement for digital submission. Start categorizing your “Repairs” vs “Improvements” now so your 2026 transition is a breeze.