Last updated: 14 October 2026
How do you report service charges on a landlord tax return?
If you let a leasehold flat, the service charges you pay to the freeholder or managing agent are an allowable expense against your rental income. Enter them in the “property repairs and maintenance” or “other allowable property expenses” boxes on the UK property pages of your Self Assessment return, depending on what they cover. If your tenant pays service charges to you, include them as rental income and deduct what you pay.
Which parts of a service charge are deductible
| Part of the service charge | Deductible? | Where to report |
| Cleaning and maintaining common parts | Yes | Repairs and maintenance |
| Buildings insurance | Yes | Other allowable property expenses |
| Ground rent | Yes | Rent, rates, insurance and ground rents |
| Management fees | Yes | Legal, management and other professional fees |
| Contribution to a sinking (reserve) fund | Usually no, until spent on repairs | See below |
| Major works that improve the building | No, capital expense | Added to CGT cost |
Sinking funds
Payments into a reserve fund for future works are usually not deductible when paid if the money is held on trust for the leaseholders and isn’t yet spent. When the managing agent spends the fund on repairs, you can claim your share then. Ask the agent for annual accounts showing what was spent and on what.
Major works
Repairs to the roof, lifts or windows that restore the building are revenue expenses and deductible. Improvements, such as adding a new lift where there wasn’t one, are capital. Capital costs are not deducted from rent, but are added to your property’s cost when you work out CGT on sale.
Example
Chloe lets a flat in Manchester for £12,000 a year. Her service charge is £2,400, including £400 buildings insurance, £300 ground rent and £200 into the sinking fund. She can deduct £2,200 against her rent this year. The £200 sinking fund contribution becomes deductible when it’s spent on repairs.
Tenant-paid charges
If the tenancy agreement makes the tenant pay the service charge directly to the managing agent, it may not be your income or expense. If you collect it from the tenant and pass it on, include it as income and claim it as an expense.
Records to keep
- Annual service charge demands and accounts
- Section 20 notices for major works
- Ground rent and insurance invoices
- Correspondence with the managing agent
Cash basis
Most individual landlords use the cash basis, so expenses are claimed when paid. If you use the accruals basis, you match them to the period they relate to.
Common mistakes
- Claiming the whole service charge, including the sinking fund contribution, in the year it is paid
- Treating improvements funded by a major works levy as repairs
- Forgetting to include service charges recovered from the tenant as income
- Claiming the same cost twice when the managing agent also deducts it from rent collected
Frequently asked questions
Can I claim service charges when the flat is empty?
Yes, if you’re actively trying to let it.
Are service charges subject to VAT?
Usually not, if the agent isn’t VAT registered or they relate to residential property.
What if the service charge includes heating?
Deductible if you pay it as landlord.
Does Making Tax Digital change this?
You’ll report quarterly if you’re in scope from April 2026.
Related: jointly owned rental income, the buy-to-let outbuilding demolition question and taxing rentals abroad.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with landlord tax returns. See our landlord accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
