What Allowable Expenses Can Landlords in London Claim?

New landlords in London often ask us about the tax implications of renting out a property they own or of investing in buy-to-let, and allowable expenses are a common topic. As a starting point, you must pay income tax on your rental income by registering for Self-Assessment and completing a tax return for the appropriate tax year.

It’s not optional. In 2017, Newham Council shared its landlord register with HMRC, who chased up any landlords not paying tax on their buy-to-let earnings.

How much tax you pay on your rental property in Tower Hamlets, Hackney, Redbridge or Newham will depend upon your personal circumstances and tax bracket. But landlords can claim tax deductions as allowable expenses – offsetting some of the money you spend on your rental business against your income to reduce your tax bill.

If you’re new to the rules about tax and rental income, read on for more details on what you can and can’t claim as allowable expenses for landlords.

What are allowable expenses?

Allowable expenses for landlords are costs which you have incurred ‘wholly and exclusively’ for the property rental business, as defined by HMRC. These include stationery and advertising for new tenants, agent fees, and repairs. But take care, as the rules have changed in recent years.

Which landlord expenses are allowable?

Items classed as allowable expenses for landlords are the day-to-day costs of managing your tenancy – often described as revenue rather than capital expenses. They are usually items which won’t add to the value of your asset (the rental property) in the long term.

Examples of landlord expenses which are allowable include:

• Insurance – Allowable expenses include your insurance policies for buildings, contents and public liability. Keep records of any landlord insurance, buildings and contents insurance, rent protection and other policies covering your rental property.
• Letting agent fees – Fees you pay for tenant finding services or property management services, qualify as tax expenses.
• Ground rent and service charges – Ground rent and service charges for leased properties quickly add up, but you can deduct these.
• Service fees – A landlord’s allowable expenses can include the costs of services, such as wages for gardeners and cleaners. So, keep track of any cleaning and gardening fees, and decorating fees for the property’s upkeep.
• Professional fees – Cost of accountants, surveyors, and solicitors. Any legal fees for lets of a year or less, for renewing a lease of fewer than 50 years, for rent collection or for any evictions are claimable. However, you can’t claim any legal fees in relation to the purchase of the property.
• Office costs and marketing – Landlords can deduct direct costs such as phone calls, stationery and advertising to new tenants. Remember, only include stationery, broadband and phone calls, directly used for your property business.
• Travel costs – Allowable expenses for a private landlord include travel for the purposes of renting out the property, and vehicle running costs (only the proportion used for the rental business). E.g. petrol used, car parking costs, or trains taken, but not parking fines or speeding tickets.
• Repairs – These can only include repairs or replacements that aren’t classed as improvements to the property and which will add value. E.g. repairs such as fixing leaking pipes or mending fixtures.
• Property taxes and bills – These include bills for the rental property’s the water rates, council tax, gas and electricity, but only if paid by the landlord. Landlords pay council tax charges and utility bills while the property’s vacant. If water charges, utility bills and council tax are included in the rent you charge, and you pay these bills yourself, you can also claim them as allowable expenses. If your tenant is responsible for paying the utility bills then you can’t claim them as a deductible allowable expense.

Remember – allowable expenses for landlords must be exclusively the result of renting out the property. If the expense only partly meets this condition, you can only deduct that part of the expense from your income – for example, the cost of lighting and heating a property, if you only rent out part of it.

Are energy efficiency and EPC upgrade costs allowable expenses for landlords? 

The costs of improving a property’s EPC rating are usually treated as capital expenditure, rather than an allowable revenue expense. Fitting new insulation, a new boiler, or double glazing generally improves the property rather than simply maintaining it (unless you are e.g. replacing broken single glazed windows with double glazed ones, as the modern equivalent).  

If you are planning energy saving improvements for the new EPC C target planned for 2030 as per gov.uk, keep separate records of these costs, as you may be able to offset them against Capital Gains Tax when the property is eventually sold. 

At the same time, there are multiple exemptions for landlords and a £10,000 cost cap for how much landlords are required to spend on their property before they can apply for an exemption. 

Which landlord expenses aren’t allowable?

1. Interest payments

You can’t claim mortgage repayment costs as an allowable expense. Previously you could claim for the interest element of your mortgage, however, new rules were fully introduced in April 2020, meaning you can no longer claim for mortgage interest. Instead, you will receive a tax credit, based on 20% of your mortgage interest payments. You can find out more about section 24 tax changes here.

2. Personal expenses

You can’t claim for personal expenses, which aren’t incurred as part of managing your property business. For example, broadband use when you’re not carrying out your landlord role, personal calls on your mobile phone bills, or clothing – even if it’s a suit for business meetings.

3. Capital expenditure

You can’t deduct capital investments in your real estate as allowable expenses. Expenses are considered capital spending if they add to or improve the property in a way that will last for a period of time. This means that the costs of renovating the rental home or adding an extension or new security system, can’t be included.

Capital costs may, however, be offset against your capital gains tax bill when you come to sell the property.

4. Relief for replacing domestic items

If your property is let furnished, you can claim tax relief on replacing domestic items – this means moveable furniture such as beds, carpets, curtains and appliances including washing machines, fridges and TVs. This relief only applies if you are replacing an existing item – so you can’t claim for furnishing the property in the first place.

The item must be solely for use by the tenants and the old item must no longer be available to them. However, you can claim for the cost of disposing of the old items.

You can only claim for a like-for-like replacement, not for upgrading to a more expensive model.

Quick-reference table: allowable vs non-allowable expenses 

Allowable Expenses	Non-allowable Expenses
Landlord insurance	Mortgage interest
Letting agent fees	Mortgage payments
Professional fees	Non-business travel
Service charges	Capital costs
Property-related travel	Domestic items
Repairs	Personal insurance
Office costs	Personal expenses
Marketing	Home improvements
Utility bills if applicable	EPC upgrades

When can landlords claim part expenses?

Landlords can claim part expenses if, for example, you use your phone or broadband for business use and personal use. To do this, calculate the proportion of each, then only claim for the time devoted to your property rental business.

How does the ‘replacement of domestic items relief’ work?

You can deduct the cost of your replacement items from your rental income when calculating your profit.

To calculate the allowable deduction for a new item, take the cost of the replacement item (limited to the reasonable cost of an equivalent item if you chose to upgrade) plus the any costs associated with disposing of the old item or acquiring the new one minus any money your received for the old item.

What about tax-free allowances?

Landlords are eligible for a property tax allowance of £1,000. If your taxable income from property is less than £1,000 you do not need to declare it to HMRC or pay any tax on it.

If your rental income exceeds £1,000, you can choose to deduct your property allowance from your rental income rather than deducting your actual allowable expenses. The best option will depend on the amount of costs you have incurred.

If you claim your property allowance, you cannot also claim a deduction for your expenses. Note that landlords using the property allowance and below the MTD income threshold are not required to use Making Tax Digital for Income Tax. Consult a tax specialist to clarify your tax liability.

Worked example: how allowable expenses reduce a landlord’s tax bill

Based on an East London landlord earning rental income of £1,725 pcm, paying tax at the 20% basic rate, for illustrative purposes only:

£1,725 x 12 = £20,700 annual rental income

Less allowable expenses of £5,000:

£20,700 – £5,000 = £15,700 taxable income

Taxed at basic rate of 20%:

£15,700 x 20% = £3,140 income tax to pay

What changes are there to record keeping and Making Tax Digital for landlords?

Keep good records as evidence that you’re following the rules on allowable expenses for buy-to-let landlords. If HMRC conduct a tax audit, you may need to show your bills, repairs and other allowable landlord expenses you have claimed for. Most landlords will need to transition to digital record-keeping too, as the government phases in ‘Making Tax Digital’ (MTD) rules. 

VAT-registered businesses are already required to comply. However, since 6th April 2026, landlords and self-employed people with a turnover or rental profits over £50,000 on their 2024-25 Self Assessment tax return also need to keep digital records and submit quarterly updates to HMRC. The MTD threshold drops to £30,000 from April 2027, and £20,000 from April 2028.  

Landlords must find MTD-compatible software solution to keep the correct digital records, including allowable expenses. If you qualify but have not registered, HMRC can now automatically sign you up. To find out more, read this government guide that explains the finer details. 

Keep receipts and accurate records of your capital expenditure too, as you may be able to claim relief on Capital Gains Tax when you eventually sell. 

Do limited company landlords follow the same allowable expenses and MTD rules? 

Making Tax Digital for Income Tax only applies to individual and sole trader landlords – not to properties held in a limited company, which pay Corporation Tax instead. Company landlords have to follow a separate set of allowable expense rules, with mortgage interest usually remaining deductible for companies. 

Looking to let property easily? We can help

Our guide of what is and isn’t an allowable expense for landlords is not exhaustive. However, this summary may help you understand what you can offset against tax as an allowable expense.

If you’re a new landlord looking to rent out property or invest in buy-to-let in East London, we can help. Contact us to find out more about our services for landlords in Silvertown, Stratford, Gidea Park, Woodford, Croydon and Dartford.

Looking for a stress-free lettings solution? Then explore our guaranteed rent services in Newham, Rush Green, Gillingham, Medway & beyond.