What expenses can I claim against my rental income?

The general rule is that the expenditure must be wholly and exclusively for the purpose of the Rental Income business. This basically means what has been incurred in relation to the income being received.  

Repairs and maintenance - Repair work carried out on the property can be claimed provided that it is not a capital improvement. Don’t forget to include the gas safety certificate, which is usually an annual expense.

You cannot claim any legal fees in connection with the purchase of the property or any fees for the initial lease if it is for more than one year.

Insurance - Premiums for the buildings and/or contents can be claimed. Note, you can’t claim the premiums for Life assurance.

Rent, rates and council tax – Ground rent is an allowable expense. Council tax, if incurred whilst the property is vacant and you’re trying to rent the property can be claimed too.

Services - Service charges or any other services in connection with the letting e.g. electricity, gas, water, television licence, telephone and other services. If you pay a gardener or cleaner a fixed rate you would include in here. If you look to employ one, see wages.

Wages – If you employ a cleaner for one hour a week and provide all the materials, then that person will probably be an employee. Be aware of employment regulations and that you are satisfying filing requirements.

Travelling expenses - Do you travel to the property to carry out maintenance or deal with issues with the tenants? If so you can claim the cost of travelling. If you travel by car, you can now claim the authorised mileage rates which are 45p per mile for the first 10000 business miles in a tax year and 25p per mile for each additional business mile. If you get public transport, you can claim the cost of your tickets.

Administration expenses -  If you incur costs in relation to postage, stationery, telephone calls and other administrative expenses include them here. You can claim use of home by checking HMRC rules here, it is unlikely that a charge for using your home as an office can be justified unless you are managing a number of properties yourself.

Other expenses - Any other expenses incurred wholly and exclusively for the property business can be claimed. For example you can claim the licence fee for Houses of Multiple Occupation (HMO).

Property income allowance (alternative to expenses and capital allowances) – If your expenses are less than £1,000 on a solely owned property or £1,000 x number of owners, you can claim the property income allowance instead. This is an individual claim on each person’s own tax return. Don’t overlook the benefits of claiming this instead of your actual expenditure during the year.

Finance costs (restricted for most residential properties) - The interest paid and arrangement fees on any loan taken out to purchase or improve the rental property together with any bank charges on a separate rental property bank account are finance costs. Mortgage interest on Residential properties is restricted and should be included in BOX 44 (22/23).

Replacement of Domestic Items relief

Where a residential property is not a Furnished Holiday let or no Rent a Room relief is claimed, the expenditure on replacing items of furniture and white goods will be allowed as an expense less any proceeds on the disposal of the item being replaced. The initial purchase of an asset can’t be included here, you must be replacing a similar asset.

Other points to note: 

Private use - If you use the property for private purposes, which is most likely if it is a furnished holiday letting or you are not claiming Rent a Room relief in your own home, then any expenditure claimed must be restricted for its private use.

If you have previously occupied a property, then any expenditure which relates to that period of occupation cannot be claimed. So, any maintenance of the property prior to the first letting is private.

Capital allowances for Furnished Holiday Lets (not available on residential lettings) - Capital allowances are available on the purchase of fixtures, plant and machinery. There is an Annual Investment Allowance for expenditure up to £1,000,000 from 1st January 2019 until 31st December 2021 when it reverts back to £200,000.

Examples of expenditure eligible for Annual Investment Allowance (not for residential properties) are as follows:

The list is not exhaustive and you should obtain further advice if you have any queries. 

If you sell an asset on which you have previously claimed Capital Allowances, the proceeds are taken into account and may create an additional income charge.

Capital expenditure

The cost of purchasing or improving a property (e.g. an extension) cannot be claimed as revenue expenditure against your property income. The distinction between capital and revenue expenditure is not black and white. If you buy a property and simply redecorate it before you let it out, this will be revenue expenditure. If, however, you bought a property for a significantly lower price than normal because it was in a poor condition and then carried out substantial renovations, this expenditure would probably be considered as capital expenditure. 

Capital expenditure is eligible for relief when you come to sell the property, so it is important that you keep records and receipts for the expenditure incurred.