What Expenses Can I Claim as a Landlord in Central London?

London landlords typically generate more property income than buy-to-let property owners anywhere else in the UK, which can equate to heftier tax bills. However, you can reduce your tax bill by claiming for some of the expenses of renting out your residential property.

According to HMRC, over 300,000 UK landlords missed out by failing to claim tax relief on their allowable costs in last year’s returns. To avoid joining their number, find out what’s on the list of allowable expenses for landlords for HMRC purposes.

In our article, we explain which expenses you can claim as a landlord in Lancaster Gate, Fitzrovia, Swiss Cottage or Camden.

What are allowable expenses? 

As a landlord, you must pay tax on your rental income, but you can deduct several expenses, reducing the tax you owe. For a cost to be an allowable expense, it must have been incurred wholly and exclusively for the purposes of renting out the property.

Knowing what you can claim can be tricky. We have summarised the HMRC guidance in our landlord expenses list.

What expenses are allowable?

You can deduct the following expenses from your rental income to calculate your taxable profit. Always keep accurate records in case you are asked to provide proof.

Administration costs

You can only claim general running costs if they are exclusively for your property rental business, such as:

• Phone calls
• Stationery
• Postage
• Printing costs
• Office supplies

Where only part of an expense relates to your rental property, you can deduct that amount. For instance, you can claim for just the calls relating to your rental on your phone bill. You cannot declare indirect costs such as clothing, even a new business suit to wear to meetings about your rental business.

Want to know more? Take a look at rental income tax and how to reduce capital gains tax on property.

Marketing costs

Letting agent costs such as advertising for new tenants, photography and creating floor plans or virtual tours, are allowable expenses for buy-to-let landlords. You can also claim other costs incurred such as marketing your property online or running a newspaper advert.

Travel costs

You can claim the cost of travelling to and from your rental property – for example, to carry out a landlord inspection. Mileage can be claimed at 45p per mile for the first 10,000 miles and 25p afterwards. The deductible travel expenses incurred during your work as a landlord may include:

• Fuel costs
• Parking
• Public transport costs

Remember, this must relate directly to your rental business and not include personal journeys. You can’t claim for speeding fines or parking fines either.

Professional fees

Paying a letting agent to let your property, and for property management, is an allowable expense, as are accountancy fees or solicitors fees for legal work relating to letting out your property. Among the costs you can claim are:

• Agent fees for tenant-finding
• Property management fees
• Eviction costs
• Legal fees for debt collection
• Fees for certain lease renewals

Insurance

All of your buildings, contents and public liability landlord insurance is an allowable expense, as long as it related to your rental property. This includes:

• Buildings insurance
• Contents insurance
• Public liability insurance
• Home emergency cover
• Cover for non-payment of rent
• Any additional insurance you have purchased

Fees for services

You can claim for fees for services, but only if they form part of your rental agreement. These may include the provision of gardening or cleaning services (e.g. for communal areas if you rent out a flat), as well as end-of-tenancy deep cleaning fees.

Council tax and utility bills

If you include utility bills in your tenants’ rent, you can claim the costs of these as an allowable expense. These may include:

• Water rates
• Council tax
• Gas and electricity bills

It’s a particularly common situation if you rent out an HMO, where your tenants rent on an all-inclusive basis. Otherwise, many tenants pay their utility bills and council tax – in which case you can only claim for charges incurred when the property is empty and you’re covering the bills yourself.

Service charges

If your rental property is a leasehold, you can claim for any ground rents and service charges. The average service charge in London is around £2,200 according to gov.uk figures, so be sure to claim for this expense.

Repairs and maintenance

Landlords must keep their property in good order, so repairs and maintenance are allowable expenses. You can claim for plumbing work like burst pipes and leaks, boiler repairs, remedying electrical faults and damp treatment.

Repairing damaged walls, ceilings, and floors is allowable, and you can also deduct the costs of repainting between tenancies. You can also claim the costs of repairing the roof or replacing damaged windows.

HMRC only allow maintenance costs, including the accepted modern equivalent, on a like-for-like basis. For instance, double glazing is the industry norm and is no longer treated as an improvement cost.

Replacement of domestic items

You can claim ‘replacement of domestic items relief’ when replacing furnishings and appliances that have reached the end of their lifespan.

Replacement of domestic items relief covers replacing your property’s moveable furniture, and smaller items too, such as:

• Floor coverings
• Curtains and blinds
• Sofas, beds and wardrobes
• Household appliances
• Kitchenware
• Cooking utensils
• Crockery

You can also claim for the cost of disposal of the old item and delivering the replacement to your rental property.

The new original item must be entirely out of use to claim tax relief against the total cost. The replacement must be comparable (‘like-for-like’), but if, for example, new appliances are more energy efficient as standard, that’s acceptable.

If an insurance policy or a proportion of the tenant’s deposit was used to cover the costs partially, it would reduce the replacement of domestic items relief you can claim.

Want to find out more? Read up on extending a lease and the benefits of using a property management company.

What expenses aren’t allowable

The following costs are not considered allowable expenses for income tax purposes.

Improvement costs

You cannot claim for the costs of improving your property with a new addition or an upgrade. For example, exchanging a worn-out bathroom for today’s equivalent could be allowable – installing a new ensuite would be an improvement.

The cost of purchasing the property counts as a capital expenditure; this includes the purchase price, stamp duty, surveyors fees, and legal fees. The initial purchase of furniture, furnishings and white goods are also considered as capital expenses.

Capital expenses are not allowable and cannot be claimed against your rental income. However, you should keep a record of these as you might be able to offset the cost against capital gains tax if you come to sell the property in the future.

Mortgage interest

Since April 2020, you can no longer deduct your mortgage expenses from your rental income. However, instead of claiming landlord mortgage interest payments as allowable expenses, you receive a tax credit of 20% of your mortgage interest payments.

Personal expenses

You cannot claim any expenses not incurred solely for your property business.

How to work out and report your taxable profits

Keep meticulous records to help you claim tax relief on your income tax return. You only need to file a single return at the end of the tax year, even if you rent out multiple properties. HMRC consider all your rental income as part of one residential lettings business.

Record keeping

Good record-keeping is crucial. Records of allowable expenses should include:

• the date on which the expense was incurred
• the supplier
• a description of the expense
• the amount and any VAT element
• a supporting receipt

Tax free property allowance

If you earn less than £1,000 gross rental income during the tax year, you do not need to tell HMRC and will not pay tax on it.

If your gross rental income is £1,000 or above, you can elect to deduct your property allowance of £1,000 instead of deducting your actual allowable costs.
If your property portfolio makes a loss, it is better to deduct your actual allowable costs as you cannot claim for a loss if you use your property allowance.

Reporting your tax

You must fill out a Self Assessment tax return if your rental income is: 

• £2,500 or more after allowable expenses

Or

• £10,000 or more before allowable expenses

Contact HMRC if your rental income is between £1,000 and £2,500. They will advise you on whether you need to complete a tax return.

Calculate your taxable profit by deducting the total allowable expenses from the total rental income. How much tax you pay depends on your total income for the year.

Find out more

If you are considering becoming a landlord in Chelsea, Earl’s Court, Notting Hill, Maida Vale or elsewhere in central London, we can help you through the tricky issues you’ll need to get to grips with when renting out property for the first time. Contact us to find out more about our services.

Looking to Sell or Let?

Begin your journey with a free property valuation.
Get the facts and figures to make informed decisions.

Book a Valuation

Property Valuation

"*" indicates required fields

VALUATION TYPE*

SALES

RENTAL

RENTAL & SALES

Property Address*

Property Postcode*

Full Name*

Email*

Contact Number*

Additional Information

View our privacy policy regarding website enquiries.

This field is hidden when viewing the form

office

Submit

Contact Us

"*" indicates required fields

First Name*

Last Name*

Phone/Mobile Number*

Email Address*

Message

View our privacy policy regarding website enquiries.

This field is hidden when viewing the form

office

Submit