What Expenses Can I Claim for My Rental Property?

Owning and renting out property can be a lucrative source of income, but it also comes with costs. Fortunately, many of these expenses are tax-deductible, which can help reduce your tax liability and increase your rental profit. Knowing what you can claim is key to maximising your returns while staying compliant with HMRC regulations.

Here’s a detailed look at the most common expenses landlords can claim, plus a few you might not have considered.

1. Repairs and Maintenance

One of the most significant and common expenses is the cost of maintaining your property. Any work that is necessary to keep the property in good condition and habitable for tenants is deductible. This includes repairs to the roof, plumbing, electrical systems, or general wear and tear such as repainting or replacing broken windows.

Pro Tip: Preventive maintenance can also count as a deductible expense, provided it is done to maintain the property’s current condition rather than improve it.

2. Mortgage Interest

While changes in tax rules have limited the deductibility of mortgage interest, you can still claim up to 20% as a basic rate tax reduction on mortgage interest payments. This is known as the Section 24 restriction, and it means landlords no longer get full tax relief on mortgage interest.

Tip: If you are a higher-rate taxpayer, consider how the Section 24 changes might affect your long-term plans, and explore options like incorporating your rental business if it suits your financial situation.

3. Letting Agent Fees and Management Costs

If you use a letting agent to manage your property or find tenants, the fees you pay them are fully tax-deductible. This can include fees for advertising, tenancy agreements, and rent collection.

Tip: Keep detailed records of all fees you pay, as even legal fees for drafting tenancy agreements can be claimed.

4. Utility Bills (if covered by the landlord)

If you pay for any utilities such as water, gas, or electricity on behalf of your tenants, these costs can be deducted from your rental income. This is especially relevant for landlords of HMOs (Houses in Multiple Occupation).

Tip: Ensure you retain all utility bills and receipts to back up your claim during tax returns.

5. Ground Rent and Service Charges

If your property is leasehold, ground rent and service charges paid to the freeholder are allowable expenses. These fees are common in flats and some houses that are part of a shared development.

6. Council Tax and Insurance Premiums

If you, as the landlord, are responsible for paying Council Tax (for example, during vacant periods) or insurance, including buildings, contents, or landlord insurance, these costs are also deductible. Landlord insurance, which covers things like tenant damage or loss of rent, can be particularly important.

7. Motor Expenses

If you drive to your rental property for inspections, maintenance, or to meet with tenants, you can claim a mileage allowance for your travel. For the 2023/2024 tax year, HMRC allows landlords to claim 45p per mile for the first 10,000 miles, and 25p per mile thereafter. This rate includes wear and tear, fuel, and other car expenses, so you can’t claim separately for those.

Alternatively, you could claim a proportion of your actual vehicle running costs, such as fuel and insurance, if they are used partially for your rental business. Whichever method you choose, stick with it consistently each tax year.

8. Office Costs

Even if you manage your property from home, you can still claim expenses related to your office space. HMRC provides a flat-rate deduction of £6 per week for home office expenses if you work 25 hours or more per week. Alternatively, you can claim a portion of your household expenses, including mortgage interest, utility bills, and internet costs, based on how much space and time you use for your rental business.

Tip: If you choose to claim a portion of your household bills, keep detailed records to ensure the percentage claimed is reasonable and justified.

9. Professional Fees

Legal and professional fees related to your rental property are deductible. This includes fees for accountants, property management courses, or legal advice (such as drafting tenancy agreements). However, fees related to purchasing the property are considered capital expenses and are not deductible.

10. Advertising and Marketing Costs

Any costs you incur while advertising your property, such as online listings or agency fees, can be deducted. This also applies to creating marketing materials like photos or virtual tours to attract potential tenants.

11. Travel and Accommodation

If you travel a significant distance to manage your property, you can claim travel expenses, such as train, bus, or taxi fares. Hotel costs may also be deductible if you need to stay overnight for business purposes.

Tip: When claiming travel expenses, ensure the trip is wholly and exclusively for managing the property. Personal trips or travel that combines both personal and business activities cannot be fully claimed.

Key Points to Remember

• Always keep accurate and up-to-date records of all expenses to make your claims as smooth as possible.
• Ensure expenses are wholly and exclusively for the purpose of your rental business to avoid any issues with HMRC.
• If you’re unsure whether a particular expense is deductible, seek advice from a qualified accountant to avoid misclaiming.

By fully understanding and utilising these tax-deductible expenses, landlords can significantly reduce their tax bills and improve their rental income. Managing a property comes with its costs, but knowing what you can claim makes all the difference.

To find out how our experts can help you get in touch by emailing admin@fortyeightestates.co.uk or calling 01908751488.