allowable expenses for rental income

What Expenses are Allowable against Rental Income?

Usually, the landlords are prone to misunderstand the exact factors that make capital expenses and revenue expenses different from each other. It is the most common and frequently asked question as well. In this guide, we will learn what are allowable expenses for rental income? Furthermore, it is important to realise the difference between the repair and the improvement work as well. The landlords, claim only for the mortgage due to this lack of knowledge as well.

Something to beware of here includes the following as well:

  • There are some expenses that never qualify for tax relief.
  • There are certain expenditures that can only be allowable when the property is sold.
  • Some of the expenses can never be dealt with deductions but there is some special rule for them.

Further in this article, we will discuss Different expenses that are allowable against rental income. This includes the following:

What Expenses are Allowable against Rental Income

  • Maintenance and Repairing
  • Finance Cost
  • Accountancy and Management Fees
  • Services
  • Travelling Expenses

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1- Maintenance and Repairing:

The repair work that is carried in a property after the property is let can be claimed as an allowable expense, however, the repairing and maintenance expenses before the letting time will be considered as your personal expenses. This will not come under allowable expenses.

In the case of furnished letting property, the expenses on furnishing and relevant repairing cannot be claimed.


2- Finance Cost:

By finance cost we mean the expenses like arrangement fees and interest on the loans, that is used to purchase a property or to improve the condition. Any other expenses related to the separate property bank account are also in the count of finances cost.

There is a simple way to explain the finance cost through the example which is given below:

John is happened to be a teacher and his age is 49 years, as well as he is a 40% taxpayer. He intends to buy a let property and is interested in making the investment. Now that he owns the letting property for some time, outstanding debt will be low. Below is the detail mentioned:

Actual Profit Taxable profit
Gross rents 7,200 7,200
Repairs and other tax-deductible costs 1,000 1,000
Interest on mortgage 2,500 Nil
Net Rental profit 3,700 6,200
Tax at 40% 2,480
Less interest relief at 20% on £2500 500
Net tax liability on rental income 1,980


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3- Accountancy and Management Fees:

Any legal fees that are charged to buy the letting property or there can be lease initial fees are the kind of expenses that can’t be claimed. However, the following are the expenses that can easily be claimed:

  • Management and accountancy fees
  • Rent collection
  • Shorthold tenancy
  • Renewal of the lease
  • Rent collection


4- Services:

In case, you have paid services charges that are for any service related to the letting like electricity charges, this can be claimed easily. On the other hand, furnished residencies make you bound to pay for the gas, water, electricity, telephone and other such services.


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5- Travelling Expenses:

Do you have to travel to deal with the Maintenance issues of the tenants? If that is the case, the good news is that the travelling cost for this purpose can be claimed too.


The Bottom Line:

Now that you have developed a better understanding of allowable expenses for rental income, we can sum up the discussion by saying that the allowable expenses are sometimes confusing for the landlords and if HMRC picks up on any mistakes in the claim, this will be another costly factor. It is suggested to seek a tax specialist for the processing and this can help you to keep yourself safe from extra payments.

We hope this article helped to let you know more about allowable expenses.


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Disclaimer: This article intends to provide general information based on allowable expenses for rental income.

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