What expenses can I deduct from rental income?
Answered 11 March 2026
Expenses You Can Deduct from Rental Income
Based on the sources retrieved, here is a summary of the rules governing deductible expenses from rental income:
What the Law Says
The general legislative framework applies the "wholly and exclusively" rule to property business expenses. This rule (found in ITTOIA 2005 s.54, as applied by s.210) means that only expenses incurred wholly and exclusively for the purposes of the property business are deductible.
Capital expenditure is not deductible — only revenue expenses qualify. For furnished lettings, ITTOIA 2005 s.308 confirms that only expenses "of a revenue nature" are allowable.
Replacement Domestic Items Relief is available for furnished residential lettings — where a domestic item (furniture, furnishings, household appliances, kitchenware) is replaced, a deduction is available, reduced by any proceeds received on disposal of the old item.
HMRC Guidance / Practice
HMRC's guidance confirms the following categories of allowable expenses for a rental business:
✅ Allowable Expenses
| Category | Notes |
|---|---|
| Repairs & maintenance | Revenue repairs that restore a worn or dilapidated asset are allowable |
| Management fees | Letting agent fees and property management costs are allowable |
| Insurance | Building/property insurance costs are allowable |
| Finance costs (mortgage interest) | For individual landlords, mortgage interest is no longer a direct deduction — instead, a basic rate (20%) tax reducer applies under ITTOIA 2005 s.274A |
| Agricultural expenses | Maintenance, repairs, insurance and management of an agricultural estate are allowable (defined by ITA07/S123) |
❌ Not Allowable
- Capital expenditure (e.g. improvements, putting a newly acquired run-down property into useable condition) — this is capital, not revenue
- Private loan interest (e.g. interest on a loan used to buy your own home, or borrowing used to fund private living expenses)
- Expenses not meeting the "wholly and exclusively" test — e.g. expenses of a private property
⚠️ Key Practical Points
- Repairs on newly acquired property: If a property is acquired in a run-down condition and cannot be used without repair, the repair cost is likely capital (not deductible). However, routine maintenance repairs on a second-hand property can still be allowable if the purchase price was not reduced to reflect the need for repairs.
- Losses: If allowable expenses exceed rental income, the resulting loss is automatically carried forward and set against future rental profits of the same property business (ITA07/S118 and S119).
- Property allowance: As an alternative to claiming actual expenses, landlords with gross rental income of £1,000 or less may use the property allowance instead.
Note: The sources retrieved do not contain a comprehensive list of every allowable expense category (e.g. ground rent, council tax, utility bills). For a full list, you should consult HMRC's Property Income Manual (PIM2100 onwards) and HMRC's published guidance "Work out your rental income when you let property".
Citation sources
The customer may carry on a trade or profession in which a separate property becomes surplus to their trading or professional requirements. If they don’t sublet the property, they can usually deduct the rent and other expenses of that property in computing their trading or professional profits. The test is whether they undertook the rental obligations of the surplus property ‘wholly and exclusively’ for the purposes of their trade or profession (Hyett v Lennard [1940] 23TC346). Normally, the tes
If a S274A deduction is claimed, Leila would not be able to use the property allowance and her tax liability on her rental income would be calculated as follows: Rental income: £800 Finance costs (£200): £100 is allowable (50%) Other expenses: £300 Property business profits: £400 Income from employment: £60,000 Income Tax Position 2018-19 (figures for rates and bands do not apply to Scottish Taxpayers) Total Income: £60,400 Personal allowance: £11,850 Basic Rate Tax at 20% on £34,500: £6,900 Hig
A repair, which restores a worn or dilapidated asset, is normally an allowable expense. If an asset is acquired second-hand, then it is quite possible that it will need to be repaired. These repairs do not arise from use in the current business. The fact the taxpayer had repairs carried out just after they acquired the asset does not, of itself, mean that the cost of the repair is disallowable. The fact that the repairs were needed when the asset was acquired does not, of itself, mean that the c
The furnished holiday lettings rules will cease to apply in tax years commencing on or after 6 April 2025 for Income Tax and for Capital Gains Tax, and 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains. This is subject to Royal Assent. The general rule is that any rental business loss is automatically carried forward and set off against rental business profits of the following year (ITA07/S118 and S119). Except in the limited circumstances in which they can be set aga
For relief to be available in respect of agricultural expenses, all that is required is that there is a rental business loss and there are allowable agricultural expenses. The loss may not necessarily arise from the agricultural land, for example if the income from the agricultural land exceeded the expenses relating to that land. The loss would then have arisen from other parts of the rental business but relief would still be available. Allowable agricultural expenses are defined by ITA07/S123.
Notes to examples in pages IFM04372 and IFM04374. Notes 1 (a) Excluding any property income outside the Property Rental Business (see IFM04130) 1 (b) Including rental income of consolidated Intermediate Holding Vehicles (IHVs) (similarly costs figures include costs of consolidated IHVs) 2 These must be limited to income within the property rental business 3 In this example the rental income from foreign property has been reduced by drop in value of foreign currency and a hedging instrument has
Even if an asset has been recently acquired, the cost of repairs usually remains allowable expenditure. For example, the cost of routine repairs and maintenance remains allowable expenditure. If an asset is acquired in a run-down condition, however, the cost of putting the asset into a useable condition is capital expenditure and not an allowable deduction. For further guidance on this point, see BIM46935.
urposes of subsection (11), where the old item is disposed of together with other consideration, the consideration in respect of the disposal mentioned in that subsection is taken not to include the amount of, or an amount equal to the value of, that other consideration. 13 In this section, “ domestic item ” means an item for domestic use (such as furniture, furnishings, household appliances and kitchenware), and does not include anything that is a fixture. “Fixture”— means any plant or machiner
In addition to these restrictions, the normal property business rules apply, see PIM1900 onwards, including the “wholly and exclusively” rule and the rules governing the timing of relief (see PIM1100 onwards). A customer cannot, for example, deduct interest on a private loan, such as a loan used to buy their private residence. Where part of the customer’s own residence is let see PIM2100. Similarly, the interest on a loan or overdraft may not be allowable, or only part may be allowable, where th