Blog Search


Landlords – make sure you claim all the expenses you can

Whatever the reason for becoming a landlord, expenses will be incurred relating to that property at some time or another. Unfortunately, just because a payment has been made does not necessarily mean it is allowable for tax. Even if the payment is allowable, when tax relief can be claimed depends on the nature of the expense and the method by which the accounts are prepared.

The default basis for preparing letting accounts is the ‘cash basis’ where income is recognized when received and expenses when paid (providing that the expense is incurred ‘wholly and necessarily’ for the letting). The ‘accruals basis’ must be used where rental income exceeds £150,000 a year or the property business is run by a company. Under the ‘accruals’ basis, income is taxed when it is earned and expenses incurred rather than when paid. However, a landlord who is eligible for the cash basis can choose (‘opt’) to use the accruals basis if more beneficial to do so.

Usual day-to-day running expenses

To be allowable the expense should be incurred ‘wholly and exclusively for rental. On their website, HMRC gives a list of claimable expenses you would expect to see including house insurance, letting agent’s fees, management fees, ground rent, water rates, and council tax (where not already paid for by the tenant), and restricted mortgage interest relief.

Other claimable expenses

Such expenses include rent insurance, expenses related to landlord regulations (e.g. Gas Safety Certificates/checks, EPCs, purchase of smoke and carbon monoxide alarms), legal expenses relating to eviction, cleaning services including end of tenancy cleaning, regular cleaning for Houses of Multiple Occupation and common areas when dealing with commercial lets.

Problem areas

Queries can arise when claiming what are termed ‘dual purpose’ expenses. A typical cost under this heading relates to expenses incurred in running a car used partly for the rental business and partly for private purposes, the business part being allowed. The two methods of calculation permitted are:

– 45p for the first 10,000 business miles incurred and 25p for any additional business miles or
– by totalling all costs (car tax, insurance, repairs, petrol, AA/RAC subscription), recording the mileage of every property-related trip made in the tax year and the total mileage, then claiming the proportion relating to the business mileage.

Administrative costs incurred in the running of a letting business can be claimed but again only if incurred ‘wholly and exclusively’ for letting purposes (e.g. phone bills, stationery, postage, accountancy fees). With phone bills the business proportion is claimed by working out the actual cost. Unfortunately, landlords cannot claim for their own time but a claim is possible to cover the additional electric, water etc that might be spent from running the business from home under the ‘simplified expenses’ claim. The claimable amount is calculated by using a flat rate based on the number of hours worked from home each month so long as the number of hours exceeds 25 hours or more a month as follows:

Hours of business per monthFlat rate per month
25 to 50£10
51 to 100£18
101 and more£26

Capital items

Another confusing area concerns the purchase of ‘white goods’. Increasingly landlords are obliged to purchase such items for tenants and assume that the cost is immediately claimable. However, for tax purposes the initial cost is a ‘capital’ expense and under the accruals basis, capital expenditure is not deducted when computing profits – only revenue expenditure is eligible for deduction. Relief for capital expenditure is instead given under the capital allowances rules and an important point to remember is that capital allowances cannot be applied to residential property (unless a furnished holiday let).

Relief is instead given under the ‘Replacement of Domestic Items’ rules such that it is only when these items are repaired or replaced can tax relief be claimed, providing the item is a ‘like for like’ replacement. Under the cash basis, capital expenditure is simply deducted (as for an expense) in working out taxable profits unless the expenditure is of a type for which relief is specifically disallowed.

  • Latest news and testimonials

  • Latest News

    • September Q&A

      Q. I have two small businesses which are treated as a group for VAT purposes, so we only submit a single VAT return covering both …

      Read more
    • Making Tax Digital for Business: update

      In July, the Government confirmed that the Summer Finance Bill would be published in September, with the measures dropped from the pre-election Finance Bill being reintroduced …

      Read more
  • Testimonials

    • Partner – Solicitor

      I have worked with SBL over the last 10 years on numerous matters involving owner-managed business. They are professional, personable, knowledgeable and work incredibly hard to provide the best advice to their clients. I would have no hesitation in recommending SBL.

  • Don’t hesitate to ask

    SBL are here to help. With accountancy advice and tax planning experts on hand to guide you and your business on the pathway to success! You can call us on 020 7580 6822, or email us on or if you’d prefer you can complete our Free Online Enquiry Form and one of the team will be in touch shortly.

    Don’t hesitate to ask

    Don’t hesitate to ask section

    • This field is for validation purposes and should be left unchanged.

    By submitting my details on this form, I consent to being contacted by a member of the SBL Accountants team by email or telephone. Privacy Policy