Landlord expenses and the SA105: what you can claim

The expenses you can deduct

Allowable expenses are the day-to-day costs of letting, incurred wholly and exclusively for the rental business:

• Letting agent and management fees
• Landlord insurance: buildings, contents and public liability
• General maintenance and repairs: fixing the boiler, repainting, replacing a broken window
• Ground rents and service charges, council tax and utilities where you pay them
• Accountancy fees, advertising for tenants, and direct costs such as phone calls and stationery for the business

The line that matters most is repair versus improvement. Restoring something to its original condition is a repair and deductible; enhancing the property (an extension, a loft conversion, upgrading to a materially better kitchen) is capital and is not deductible against rental income, though it may reduce capital gains tax on sale.

Replacing furniture and appliances

Replacement of domestic items relief lets you deduct the cost of replacing sofas, beds, white goods, curtains, crockery and similar, provided the old item is no longer available to the tenant. The initial purchase of an item for a newly furnished let does not qualify, and upgrades are capped at like-for-like: replace a sofa with a sofa bed and you claim what an equivalent sofa would have cost.

Mortgage interest: a credit, not an expense

Since April 2020, individual landlords cannot deduct residential mortgage interest from rental income. Instead you get a tax credit worth 20% of the interest (the basic rate), applied after your profit is calculated. Two consequences catch people out: higher-rate taxpayers get relief at only 20%, and because the interest no longer reduces your income figure, the change alone can push you over thresholds such as the £50,000 child benefit taper or a Making Tax Digital band. Only the interest element qualifies; capital repayments never did.

The £1,000 property allowance

If your gross rental income is £1,000 or less in a tax year, it is covered by the property allowance and generally does not need reporting at all. Above that, you can choose to deduct a flat £1,000 instead of actual expenses, which only makes sense for very low-cost lets. You cannot claim both.

A worked example: one flat, one year

Dan lets a flat at £1,200 a month, so £14,400 of rent comes in over the year. His costs: £6,200 of mortgage interest, £1,450 of letting agent fees, £900 of repairs (a boiler part and repainting between tenants), £320 of landlord insurance and a £350 like-for-like replacement washing machine.

The agent fees, repairs, insurance and washing machine, £3,020 in all, are deductible expenses on the SA105, leaving a property profit of £11,380. The mortgage interest never touches the expense boxes: it is declared separately and comes back as a basic-rate tax credit of 20%, worth £1,240 off the final bill. That distinction matters more the more Dan earns. The genuine expenses reduce his taxable income and therefore save tax at his marginal rate, while relief on the £6,200 of interest is pegged at 20% no matter what band he is in.

Would the £1,000 property allowance have served him better? Not remotely: £3,020 of real expenses beats a flat £1,000. The allowance is for landlords with genuinely minimal costs, not for anyone running a normal let with an agent and an ageing boiler.

Furnished holiday lets: the regime is gone

The furnished holiday lettings regime was abolished from 6 April 2025. Former FHL income is now part of your ordinary property business: the 20% finance-cost credit applies, capital allowances are no longer available for new spending (replacement of domestic items relief takes over), and the capital gains reliefs that made FHLs attractive have been withdrawn.

Landlords and Making Tax Digital

Property income counts towards MTD's qualifying income alongside self-employment turnover, measured gross. Landlords over £50,000 were mandated from April 2026; over £30,000 follows in April 2027 and over £20,000 is set for 2028. That means digital records and cumulative quarterly updates, per income source. Our bank statement analyzer can turn a rental account's statements into categorised income and expense lists, and the quarterly reporter groups a year of statements into HMRC's quarters; the full rules are in our MTD guide.

Frequently asked questions