When you earn rental income from a property in the UK, you are generally liable to pay tax on that income. However, you are entitled to deduct certain expenses from your rental income before calculating the taxable profit. These allowable expenses can help reduce your tax liability and include the following:

1. Mortgage Interest: If you have a mortgage on the rental property, you can claim a portion of the interest paid as an allowable expense. Since 6^th April 2020 the Income Tax relief on all residential property finance costs has been restricted to the basic rate of income tax.
2. Repairs and Maintenance: Expenses incurred for the repair and maintenance of the property are generally allowable. This includes costs for fixing structural issues, plumbing, electrical repairs, painting, and similar maintenance works. However, it’s important to distinguish between repairs and improvements. While repairs are typically allowable, improvements or enhancements to the property’s value are not immediately deductible. Instead, they may be subject to capital allowances or claimed when you sell the property.
3. Council Tax and Utility Bills: You can deduct the cost of council tax, water rates, gas, electricity, and other utility bills that you pay as the landlord. However, if the tenant is responsible for paying these expenses, you cannot claim them as allowable expenses.
4. Insurance: The premiums paid for landlord’s insurance, which covers the property and contents, are considered allowable expenses. It’s important to note that standard homeowners’ insurance policies may not cover rental activities, so it’s advisable to have specific landlord insurance.
5. Letting Agent and Property Management Fees: If you engage the services of a letting agent or property management company to help manage the rental property, their fees are allowable expenses.
6. Advertising and Marketing: Costs incurred for advertising the property and finding tenants, such as listing fees, signage, or professional photography, are generally allowable.
7. Legal and Accountancy Fees: Fees paid to solicitors, accountants, or tax advisors for advice and assistance related to the rental property may be claimed as allowable expenses.
8. Ground Rent and Service Charges: If the rental property is leasehold, you can deduct the ground rent and service charges paid to the freeholder or property management company.

Remember that these are just some examples of allowable expenses, and there may be other eligible costs depending on your specific situation. It’s crucial to keep accurate records and receipts for all expenses to support your claims in case of an HMRC inquiry.

Alternatively, if your rental expenses are very low, you can choose to claim the property allowance instead, this will offset an automatic £1,000 expense against your rental income, but will mean you cannot claim for other expenses.

Please note that tax laws and regulations can change, so it’s always important to consult with a professional or refer to the latest guidelines from HM Revenue & Customs (HMRC) for specific and up-to-date information.

For more information about the types of expenses you could claim, contact us at [email protected]