Why it matters
What Allowable Expenses means for a landlord
Getting allowable expenses right is the single biggest lever on a landlord’s tax bill after mortgage interest. The classic error is deducting an improvement (a new extension, a better kitchen) as a repair, HMRC treats that as capital, not an expense, so it belongs against Capital Gains Tax on sale, not against rental income now. Keep every receipt and label each cost as repair or improvement at the point you spend it, because reconstructing it a year later is where landlords lose deductions and invite an enquiry.
Worked example
How it plays out
Priya lets a flat for £14,400 a year. She spends £600 on boiler repairs, £900 on agent fees, £320 on landlord insurance and £180 on accountancy, £2,000 of allowable expenses that reduce her taxable rental profit. She also replaces a worn kitchen with one of a similar standard for £4,000, which counts as a repair. A neighbour who builds an extension with a much larger kitchen cannot deduct that from rental income, because it improves the property; it may reduce Capital Gains Tax on a sale instead.
Common mistakes
Where landlords go wrong
- 01Claiming an improvement, such as an extension, as a repair.
- 02Deducting mortgage capital repayments, or treating interest as an ordinary expense instead of a tax credit.
- 03Having no receipts or notes, so repair and improvement cannot be told apart a year later.
What to do
A short checklist
- Keep every invoice and note whether each cost is a repair or an improvement.
- Record the condition before and after significant work.
- Track mortgage interest separately for the Section 24 credit.
Sources
Checked against these sources on 16 September 2026. A guide to the rules in England, not legal advice: for a dispute or a possession claim, speak to a solicitor.
