What expenses can landlords deduct in 2026?

Landlords can deduct most revenue expenses including letting agent fees, insurance, repairs (not improvements), professional fees, advertising costs, travel expenses, and utilities during void periods. Individual landlords get 20% tax credit on mortgage interest rather than full deduction due to Section 24 rules, while companies can still deduct mortgage interest as a business expense.

How does Section 24 affect mortgage interest deductions?

Section 24 prevents individual landlords from deducting mortgage interest as an expense. Instead, you receive a 20% tax credit on interest paid. For example, £10,000 mortgage interest gives a £2,000 tax credit rather than reducing taxable rental income by £10,000. This significantly impacts higher-rate taxpayers, which is why many consider incorporating their property business.

Can I deduct property improvements as expenses?

No, property improvements cannot be deducted as expenses - they're capital costs. Improvements include adding new kitchens, extensions, central heating installations, or upgrading to double glazing. However, repairs that restore property to original condition (fixing broken items, repainting, replacing worn carpets with similar quality) are fully deductible.

What records do I need to keep for property tax deductions?

Keep all invoices, receipts, bank statements, contracts, and photos of work completed. From April 2026, landlords with over £10,000 annual rental income must keep digital records and use MTD-compatible software for quarterly submissions to HMRC. Maintain detailed mileage logs for vehicle expenses and separate business from personal costs using dedicated accounts.

Landlord Tax Deductions UK 2026: Complete List & Guide

Understanding which expenses you can deduct as a UK landlord is crucial for minimising your tax liability. With Section 24 restrictions still affecting many landlords and Making Tax Digital for Income Tax Property starting in April 2026, getting your deductions right has never been more important.

This guide covers all allowable landlord tax deductions for the 2026/27 tax year, with practical examples and current restrictions you need to know about.

Property Management and Administration Costs

These are typically your largest category of landlord tax deductions and include most day-to-day running costs of your rental business.

Letting Agent Fees

All fees paid to letting agents are fully deductible, including:

Monthly management fees (typically 8-15% of rental income)
Tenant finding fees
Check-in and check-out fees
Rent collection charges
Property inspection fees

Legal and Professional Fees

Most professional costs related to your rental property are allowable:

Accountancy fees for preparing rental accounts
Legal fees for new tenancy agreements
Debt collection costs
Court fees for possession proceedings
Surveyors' fees for rental valuations

Note: Legal fees for purchasing property are not deductible - these are capital costs that may be offset against future capital gains.

Insurance Premiums

All insurance directly related to your rental property is deductible:

Buildings insurance
Contents insurance (for furnished lets)
Landlord liability insurance
Rent guarantee insurance
Legal expenses insurance

Property Maintenance and Repairs

Understanding the difference between repairs (deductible) and improvements (capital costs) is essential for landlord tax deductions.

Allowable Repair Costs

Repairs that restore property to its original condition are fully deductible:

Fixing broken boilers, windows, or doors
Repainting walls in the same colour
Replacing broken tiles with identical ones
Unblocking drains
Plastering damaged walls
Replacing worn carpets with similar quality

Replacement of Domestic Items Relief

For furnished properties, you can claim relief when replacing domestic items like:

Furniture (beds, sofas, tables)
Appliances (washing machines, fridges, cookers)
Soft furnishings (curtains, carpets, bedding)
Crockery and cutlery

You can deduct the cost of the replacement item, minus any proceeds from selling the old item. If you upgrade to a better quality item, you can only deduct the cost of a basic replacement.

Non-Deductible Improvements

These capital improvements cannot be deducted as expenses:

Installing a new kitchen when the old one was functional
Adding a conservatory or extension
Converting a garage to a bedroom
Installing central heating for the first time
Upgrading single glazing to double glazing

Mortgage Interest and Finance Costs

This remains the most complex area for landlord tax deductions due to Section 24 restrictions affecting individual landlords.

Individual Landlords (Section 24 Rules)

Since April 2020, individual landlords cannot deduct mortgage interest as an expense. Instead, you receive basic rate tax relief (20% in 2026/27) as a tax credit.

Example: A landlord paying £12,000 annual mortgage interest receives a £2,400 tax credit (20% × £12,000) rather than deducting the full £12,000 from rental income.

This restriction significantly impacts higher-rate taxpayers, which is why many landlords consider incorporating their property business.

Property Companies (SPVs)

Companies can still deduct mortgage interest and other finance costs as business expenses, including:

Mortgage interest payments
Arrangement fees for mortgages
Bank charges and overdraft fees
Loan arrangement fees (spread over loan term)

Travel and Vehicle Expenses

Travel costs for your rental property business are deductible, but personal travel is not.

Allowable Travel Costs

Journeys to inspect properties
Travel to meet tenants or letting agents
Trips to collect rent
Visits to building suppliers for maintenance items
Travel to court hearings

You can use either actual costs (fuel, parking, tolls) or HMRC's approved mileage rates: 45p per mile for the first 10,000 miles, then 25p per mile.

Non-Deductible Travel

Travel between your home and a property you're considering purchasing is not deductible, as this is capital expenditure rather than a revenue expense.

Utilities and Property Services

Utility costs are deductible when you're responsible for paying them, typically during void periods or for communal areas.

Deductible Utility Costs

Gas and electricity during void periods
Water rates when property is empty
Council tax on empty properties
Communal electricity for shared areas
Standing charges for utilities

Service Charges

For leasehold properties, relevant service charges are deductible:

Ground rent
Management charges
Building maintenance contributions
Communal area cleaning
Lift maintenance charges

Advertising and Marketing

Costs of finding tenants are fully deductible:

Rightmove and Zoopla advertising fees
Newspaper property adverts
Photography for property listings
For Sale boards (if selling as a business decision)
Website costs for property portfolios

Office Costs and Stationery

Administrative costs of running your rental business are deductible:

Stationery and postage
Phone calls related to properties
Computer software for property management
Office furniture (if used exclusively for rental business)
Proportion of home office costs

Home Office Deduction

If you use part of your home exclusively for your rental business, you can deduct a proportion of:

Mortgage interest or rent
Council tax
Utilities
Home insurance
Repairs and maintenance

The proportion should reflect the business use - for example, if your home office is 10% of your house and used 50% for rental business, you could deduct 5% of relevant home costs.

Bad Debts and Rent Arrears

Unpaid rent can be deducted as a bad debt, but only if:

The rent was previously included in your rental income
You've made reasonable efforts to collect it
You genuinely believe it won't be recovered

You must add the amount back to income if you subsequently recover it.

Pre-Trading Expenditure

Costs incurred up to 7 years before you start letting a property can be treated as incurred on the first day of trading, including:

Advertising for tenants before completion
Professional advice on rental potential
Insurance premiums paid before letting begins
Repairs undertaken to make the property lettable

Capital Allowances on Equipment

Business equipment purchases can qualify for capital allowances:

Annual Investment Allowance

You can claim 100% relief on equipment costing up to £1 million annually (2026/27 rate), including:

Office equipment and computers
Tools and equipment for maintenance
Safety equipment
Cleaning equipment

Excluded Items

Cars and items for personal use don't qualify for capital allowances in rental businesses.

What You Cannot Deduct

Understanding non-allowable expenses prevents costly mistakes:

Capital Expenditure

Property purchase costs
Stamp duty land tax
Legal fees for buying property
Survey fees for purchases
Major improvements and extensions

Personal Expenses

Your own accommodation costs
Personal clothing or entertainment
Fines and penalties
Political donations
Personal proportion of mixed-use expenses

Specific Restrictions

Business entertainment (client meals, hospitality)
Gifts over £50 per person per year
Most legal costs for lease extensions over 50 years
Abortive purchase costs (viewing fees for properties not bought)

Record Keeping for Landlord Tax Deductions

With Making Tax Digital for Income Tax Property starting in April 2026, digital record keeping becomes mandatory for landlords with annual property income over £10,000.

Essential Records

Keep detailed records of all deductible expenses:

Invoices and receipts
Bank statements showing payments
Contracts and agreements
Mileage logs for vehicle expenses
Photos of repairs and maintenance work

Digital Requirements

From April 2026, eligible landlords must:

Keep digital records
Submit quarterly updates to HMRC
Use MTD-compatible software
Maintain an audit trail of all transactions

Maximising Your Deductions

To optimise your landlord tax deductions:

Plan Major Expenses

Time large repair projects to maximise tax efficiency. If you're a higher-rate taxpayer considering incorporation, completing major repairs before transferring to a company can be more tax-efficient.

Separate Business and Personal

Use dedicated business bank accounts and credit cards to simplify record keeping and ensure all business expenses are properly documented.

Consider Professional Advice

Given the complexity of property taxation and upcoming MTD requirements, professional advice often pays for itself through optimised tax planning and compliance.

Our property tax services include comprehensive expense planning and MTD preparation to help landlords maximise their allowable deductions while staying compliant with current regulations.

Summary

Landlord tax deductions remain extensive despite Section 24 restrictions on mortgage interest relief for individual landlords. The key is understanding what qualifies, maintaining proper records, and preparing for the digital requirements starting in 2026.

Focus on maximising clearly allowable expenses like repairs, management costs, and professional fees, while being cautious about the capital/revenue distinction that catches many landlords.

With proper planning and record keeping, these deductions can significantly reduce your property tax liability and improve your rental business profitability.