Allowable expenses for Landlords

Allowable expenses for Landlords

If you're a landlord in the UK, understanding what you can claim as allowable business expenses is crucial for managing your finances and minimizing your tax bill. As a landlord, you're required to pay tax on the income you earn from renting out properties, but the good news is that there are many expenses you can offset against this income. By claiming these allowable expenses, you can reduce your taxable profit and keep more of your rental income.

In this post, we will walk you through the most common allowable property expenses for UK landlords, and explain how to keep track of them so you can ensure you're complying with HMRC’s rules.

1. **Mortgage Interest**
Mortgage interest is one of the largest allowable expenses for landlords. You can deduct the interest on any mortgage you have taken out for the rental property. However, it’s important to note that HMRC has changed the rules around mortgage interest tax relief in recent years. Since April 2020, mortgage interest can no longer be deducted as an expense; instead, it’s replaced with a **tax credit** based on 20% of the mortgage interest paid.

2. **Repairs and Maintenance**
You can claim for repairs and maintenance costs as long as they are necessary to maintain the property in a rentable condition. Examples include:

- Fixing leaks
- Repairing plumbing or electrical issues
- Painting and decorating
- Replacing broken windows
- Replacing or repairing the roof

Remember that **improvements** to the property, which increase its value (e.g., adding a new extension or upgrading the kitchen), are not allowable expenses. Only repairs and maintenance that bring the property back to its original condition can be claimed.

3. **Property Management**
If you hire a property management company to handle the day-to-day running of your rental property, the fees they charge are deductible. This includes:

- Rent collection
- Property maintenance coordination
- Managing tenant queries
- Advertising for new tenants

These costs can be fully claimed against your rental income.

4. **Insurance Premiums**
Landlords must have insurance for their rental properties, and the cost of these insurance premiums is deductible. This includes:

- **Buildings insurance** – Covers the cost of damage to the property structure.
- **Contents insurance** – Covers damage to or loss of items you provide for your tenants, such as furniture or appliances.
- **Landlord insurance** – This includes coverage for tenant damage, legal disputes, or loss of rent.

Make sure you keep receipts or records of any insurance payments made throughout the year.

5. **Council Tax and Utility Bills**
If you’re paying council tax or utility bills (such as gas, electricity, or water) on behalf of your tenants, you can claim these costs as allowable expenses. However, if tenants are directly responsible for paying these bills, they cannot be claimed as your expenses.

6. **Legal and Professional Fees**
You can claim for any legal or professional fees you incur that are directly related to the rental property. This includes:

- **Legal fees** for evicting tenants (following the correct legal process)
- **Letting agent fees** (if you use an agent to let your property)
- **Accountant fees** for managing your rental income or completing your tax return
- **Legal advice** related to rental agreements, disputes, or tenant management

7. **Depreciation and Capital Allowances**
While you cannot claim depreciation on the property itself, landlords may be able to claim for capital allowances on items such as furniture, appliances, and fixtures. These items can be depreciated over time and deducted from your rental income. Keep in mind that capital allowances only apply if the items are provided for the tenant’s use.

8. **Travel Expenses**
If you travel to the rental property for maintenance, repairs, or management duties, you can claim travel expenses. This includes:

- Car mileage or fuel costs if you use your personal vehicle for property-related work.
- Train or bus fares for travel to and from the property.

It’s important to keep detailed records of your mileage or travel expenses, including the purpose of each journey.

9. **Advertising and Marketing Costs**
If you advertise for tenants, any costs associated with finding new tenants are deductible. This includes:

- Online advertising
- Newspaper listings
- Fees for professional photography or video tours
- Costs of hiring a letting agent to find tenants

10. **Tenant-Finding Fees and Other Charges**
If you pay fees to a letting agent or third party to find tenants for your rental property, these fees can be deducted. Additionally, any costs incurred for tenant referencing, credit checks, or deposits for tenant protection can be claimed as allowable expenses.

As a landlord, being aware of the allowable expenses you can claim is crucial to ensuring you're paying the correct amount of tax and maximizing your profits. From mortgage interest and repairs to insurance premiums and management fees, there are plenty of costs you can offset against your rental income.

It’s always a good idea to keep detailed records of all your expenses, as HMRC may request to see evidence if you’re audited. If you’re unsure about specific expenses or how to file your tax return, consider consulting with a tax professional or accountant to help ensure you’re making the most of available deductions.If you need help please do not hesitate and contact Sigma Accounting, our certified accountants can navigate you and prepare your accounts.