Landlord allowable expenses and section 24 in the UK

Last updated 26 Oct 2026

UK landlords who are individuals can deduct day-to-day running costs, such as repairs, insurance and letting agent fees, from rental income, but not capital costs. Mortgage interest is not deducted: you get a tax reduction worth 20% of it instead, often called section 24.

These are HMRC Income Tax rules, so they apply to landlords in England, Scotland, Wales and Northern Ireland. They cover individuals letting residential property, not companies. This page is general information, not tax advice.

What counts as an allowable expense

GOV.UK says allowable expenses are "things you need to spend money on in the day-to-day running of the property". An expense must be wholly and exclusively for the rental business. GOV.UK's guide to working out rental income lists examples, including:

general maintenance and repairs to the property
water rates, council tax, gas and electricity, where you pay them
landlord insurance, such as buildings, contents and public liability cover
letting agent and management fees
accountant's fees
ground rent and service charges
vehicle running costs, only for the share used for the rental business

You cannot claim the full mortgage payment, personal costs, or anything not incurred solely for the rental business.

Repairs or improvements: revenue or capital

GOV.UK says "capital expenses are not allowable and cannot be claimed against your rental income". Buying the property, first furnishing it and improving it are capital. Keep the receipts anyway: capital costs may count towards Capital Gains Tax when you sell.

HMRC's manual on whether a repair is capital says it is "largely a question of fact and degree". It gives three useful pointers:

New materials. Replacing worn parts with new materials stays a repair, even if the result is slightly better.
Modern equivalents. Changes due to advances in technology are generally a repair. HMRC's example is replacing single glazing with double glazing.
Run-down purchases. Refurbishing a property bought in a derelict or run-down state is capital.

Replacement of domestic items relief

You cannot deduct the cost of first furnishing a let property. Since 6 April 2016 you can deduct the cost of replacing domestic items, under HMRC's replacement of domestic items relief.

What it covers. Movable furniture, furnishings such as carpets and curtains, household appliances and kitchenware.
What it does not cover. Fixtures such as baths, toilets, built-in wardrobes and boilers. Replacing those may count as a repair instead.
Like for like. If the new item is substantially better, you can deduct only what a like-for-like replacement would cost.
Sale of the old item. Money you get for the old item reduces the deduction. HMRC's example: sell an old sofa for £100 and buy a £600 one, and you deduct £500.
Exclusions. No relief for furnished holiday lettings or where you claim Rent a Room relief.

Mortgage interest and the 20% tax reduction (section 24)

Since 6 April 2020, individual landlords cannot deduct residential finance costs from rental profits, as HMRC's manual explains. GOV.UK says relief is "restricted to the basic rate of Income Tax".

Restricted finance costs include interest on mortgages, loans (including loans to buy furnishings) and overdrafts, plus fees for getting or repaying them. Only the interest is relieved; capital repayments never are.

GOV.UK's worked examples set out how the tax reduction is worked out:

It is 20% (the basic rate) of the lowest of three figures: your finance costs, your property profits, or your adjusted total income above your personal allowance.
If profits or income cap it, the unused finance costs carry forward to later years.

Companies are outside this rule. HMRC says corporate landlords deduct interest under the corporation tax loan relationship rules instead.

The £1,000 property allowance

The property allowance gives up to £1,000 a year of property income tax-free.

Income of £1,000 or less. You do not need to tell HMRC, unless you cannot use the allowance.
Income over £1,000. You can deduct £1,000 instead of your actual expenses. You cannot do both.
Not with mortgage interest. You cannot use the allowance if you claim the finance cost tax reduction on a residential property.
Not with Rent a Room. It does not apply to income from letting a room in your own home under the Rent a Room scheme.

If expenses are above £1,000, claiming them usually leaves less taxable profit. Work out both before you choose.

When to tell HMRC

Rental income	What GOV.UK says to do
£1,000 or less	Nothing, if the property allowance covers it
£1,001 to £2,500	Contact HMRC
Over £2,500 after expenses, or over £10,000 before	File a Self Assessment tax return

If you do not usually file a return, register by 5 October after the tax year you had rental income. Landlords with qualifying income over £50,000 have been in Making Tax Digital since 6 April 2026, and must keep digital records and send quarterly updates.

Records to keep

GOV.UK says your records could include rent books, receipts, invoices, bank statements and mileage logs. It also says:

Record the rent you receive and every expense you claim.
Keep income from fully furnished lettings separate from unfurnished or part-furnished lettings.
Keep records for at least 5 years after the 31 January filing deadline for that tax year.
Keep records of capital costs too, for Capital Gains Tax.

Keep receipts and certificates with Letbook

Letbook is a compliance tracker for landlords, not accounting software. It does not record expenses, work out tax or file returns. You can upload receipts, invoices and certificates to each property's documents, so they are dated and in one place when you do your return. Sign up free.

Living abroad? See non-resident landlords: the HMRC scheme and form NRL1.

Sources

Facts checked on 26 October 2026. Dates relied on: replacement of domestic items relief from 6 April 2016; finance cost restriction fully in place from 6 April 2020. This page is general information, not tax advice.