Allowable expenses for landlords: what can you deduct?

If you make an income from letting out a property, you will probably have to report that to HMRC. You will also have to pay Income Tax on the profit you make. However, there are a number of allowable expenses you may be able to deduct from your income, which will decrease the amount of tax you have to pay. This guide explains the different types of deductions you can make and which types of property they apply to.

Different types of property income

The allowable expenses you can deduct from your income vary according to your circumstances and the type of property you are renting out. For example, the amount you can deduct for mortgage interest may differ depending on whether your property is a residential let or a non-residential let, such as an office or factory.

There are also specific rules about paying tax on property income if:

• you let out a room in your home
• you live abroad but receive income from a property in the UK
• you live in the UK but receive income from a property abroad

The information in this guide applies to landlords who live in the UK, who receive income from property that’s located in the UK, and who are not renting out a room in their own home.

What can you deduct?

If you want to deduct expenses from your property income, they must have been incurred wholly and exclusively for the purposes of letting out a property from which you earned income. Types of expenses you may be able to deduct, include:

• mortgage interest (read more details below)  
• maintenance and repairs to your property (find out more below)
• water rates, council tax and utilities such as gas and electricity
• relevant insurance policies, such as buildings, contents and public liability insurance
• costs of services relating to the property, such as payments to gardeners and cleaners
• letting agent and management fees
• accountant fees
• some legal fees
• ground rent and service charges
• marketing costs such as phone calls, stationery and advertising for new tenants
• the proportion of vehicle running costs used for the property rental
• rent if you’re sub-letting

More information about which expenses landlords can and can’t deduct from their income when working out their taxable profit is available on the government’s website. If you’re in any doubt about what you can deduct, we recommend that you speak to an accountant.

Mortgage interest

If you earn income from letting out a non-residential property (e.g. an office), you can deduct the full amount of interest on any mortgage you’ve taken out on that property when you work out your taxable profit.

If your property income is from letting out a residential property, you can usually deduct 20% of the interest (equivalent to the basic rate of Income Tax) from the amount of tax you pay. For example if you pay £200 in interest, you will usually be able to deduct £40 from your tax bill. 

If you increase a mortgage loan on your property, you may also be able to deduct the interest on the additional loan from your income / tax. More information about how to claim interest for an increased mortgage as an expense is available on the government’s website.

Maintenance and repair costs

In most cases, you can deduct the costs of repairs to your property from your income when you work out your taxable profit. HMRC usually defines a repair as something that restores the repaired item to its original condition. You shouldn’t, however, deduct the cost of ‘capital improvements’ from your income. HMRC usually defines a capital improvement as something that alters or improves the item.

Some examples of repairs (as opposed to capital improvements) might include:

• replacing tiles that were blown off the property’s roof by a storm
• replacing the property’s broken boiler with an equivalent model
• redecorating the property to restore it to its original condition

You can find more examples of typical repair costs that you can deduct as expenses on the government’s website.

If you have an insurance policy that covers the cost of some repairs to your property, you can only deduct the additional costs that aren’t covered by the policy.

Costs for replacing furnishings or non-integral equipment in the property can’t be deducted from your income when you calculate your taxable profit, but they may qualify for replacement of domestic items relief.

Claiming ‘part expenses’

If you incur a ‘part expense’ -  an expense that’s only partially for the purpose of letting out a property - you can deduct the part relating to the property when you work out your taxable profit, as long as that part of the expense is wholly and exclusively for the purpose of letting out the property. 

For example, if you purchase a tin of paint and use half of it to repaint a damaged wall in a property you let out, and the other half in your own home, you can only deduct half the cost of the paint from your income when you come to calculate your taxable profit.

You can find more examples of part expenses on the government’s website.

We have a handy calculator to help you

If you’re a UK-based landlord and earn income from property in the UK, you can use our allowable expenses tool to calculate the amount you can deduct when you work out your taxable profit.

FreeAgent for Landlords

FreeAgent for Landlords is specifically built to help you manage your property finances, view your property profitability, and submit Self Assessment or Making Tax Digital for Income Tax to HMRC. Find out more.

23rd September 2026