WHAT PERMITTED OUTGOINGS CAN LANDLORDS CLAIM?

Landlords’ allowable expenses may consist of:

  • Upkeep and general repairs to the house
  • Renovating between tenancies on a like-for-like basis
  • Costs of cleaning and gardening at the rental property
  • Replacing fixtures and fittings on a like-for-like basis only (no betterment is allowed)
  • Service fees and ground rents
  • Gas, electricity, water rates, and council tax (if you pay them rather than your tenant)
  • Insurance (including public liability, building, and contents)
  • Management or letting agent fees
  • Legal fees or advice for tenancies of  one year or less
  • Accounting and book-keeping charges
  • Direct expenses (such as phone calls, stationery, and tenant ads) but only the percentage used for your rental business) Vehicle/fuel costs when visiting the rental property
  • Expenditures associated with getting rid of outdated furniture, electronics, etc.

WHAT COSTS CANNOT BE CLAIMED BY LANDLORDS?

Mortgage capital repayments are not acceptable expenses for landlords to deduct. Instead, landlords currently get a 20% tax credit.

Installing a new security alarm system is only deductible if it is a “like for like” replacement for the existing system; it cannot be superior. If upgrading an alarm system would have cost £650 but replacing an old one would have cost £400, you can only deduct £400 from your permitted expenses.

WHAT ABOUT MAINTENANCE, REPAIRS, AND IMPROVEMENTS TO THE PROPERTY?

General maintenance or repairs are permissible provided that you are not bettering the property and only using like-for-like fixtures or fittings.  Improvements to a property, such as a loft conversion or an addition, are not considered eligible expenses. Because a property’s value improves as a result of an upgrade, adaptation, or enhancement, this is referred to as a “capital improvement” for tax purposes. Keep track of all such capital expenses though, as you might be eligible to deduct them from Capital Gains Tax if you later sell the home.

CAN LANDLORDS SEEK RELIEF FOR REPLACEMENT DOMESTIC ITEMS?

A landlord cannot deduct the cost of replacing fixtures or furnishings in a rental property as an eligible expense. However, you might be eligible for Replacement Domestic Item Relief, which will lower your income tax obligation.

If your rental property is furnished or partially furnished, you can be eligible for Replacement Domestic Items relief for replacing furniture such as beds, mattresses, carpets, curtains, white goods, sofas, crockery, and cutlery as long as the quality is comparable and the amount is not higher. If it is superior, you are only allowed to deduct (as an eligible expense) the amount necessary to replace identical items.