The costs that cause arguments are not the letting agent's fee or the insurance. They are the sofa you replaced, the boiler you did not, the £1,000 allowance somebody told you to claim, and the mortgage interest that stopped being an expense in 2020. Those four decide most of the tax on a small portfolio.
Guide · Updated September 2026
Nearly every expenses argument comes back to one question. Did the spending restore something you already had, or did it add something you did not? Revenue spending is deducted from this year's rental profit. Capital spending is not — it stays with the property until you sell it, which is a much longer wait and a different tax. Our capital gains guide covers the other end of that journey.
The clearest place to see where the law draws that line is the one relief that exists purely to deal with it, so that is where this guide starts. The rest covers the two allowances that most often get claimed wrongly, the cost that is no longer an expense at all, and the question of who claims what.
The relief lives in ITTOIA 2005 section 311A for income tax and CTA 2009 section 250A for corporation tax. It has applied from 6 April 2016 for income tax and 1 April 2016 for corporation tax, and it is the successor to the old wear and tear allowance, which no longer exists.
Three words carry the whole relief.
Replacement. The relief covers replacing an item, not buying one for the first time. Furnishing an empty property before the first tenant moves in gets nothing under it. Replacing those same items five years later does. That single distinction accounts for most of the disappointment in this area, particularly on a first let.
Domestic. The relief covers moveable furniture, furnishings, household appliances and kitchenware — beds, sofas, curtains, carpets, fridges, washing machines, crockery and cutlery.
Not fixtures. The relief expressly excludes fixtures. HMRC's examples of what that means in practice are baths, toilets, fitted furniture and boilers. Replacing a cracked toilet is not a domestic item claim. It may well still be a deductible repair on ordinary principles, but it is not this relief and should not be claimed as though it were.
Two categories of property are excluded outright: furnished holiday lettings and properties within rent-a-room. The furnished holiday letting exclusion has been overtaken by events — Schedule 5 to the Finance Act 2025 abolished the FHL regime from 6 April 2025 for income tax, and one of the four changes it made was removing capital allowances for new expenditure and allowing replacement of domestic items relief instead. A former holiday let now sits in the ordinary property business rules like any other let.
If you replace like for like, the relief is the full cost of the new item. If the new item is better than the old one, relief is restricted to the lesser of the cost of the new item, and the cost that would have been incurred if the old item had essentially been replaced like for like.
A landlord replaces a worn three-seater sofa with a similar one costing £550. Like-for-like, so the relief is the full £550.
In a second flat she replaces the same kind of sofa with a leather one costing £1,400. An equivalent replacement would have cost £550. Relief is the lesser of £1,400 and £550, so £550 — the extra £850 is an improvement and gets nothing this year.
In a third, a broken washing machine is replaced with a washer-dryer at £520. A plain washing machine of similar quality would have cost £340. Relief is £340. Across the three she claims £1,440 against the £2,470 she actually spent. Figures are illustrative.
The practical point is that the comparison figure has to exist somewhere. A note of what the equivalent item would have cost, made at the time of purchase, is worth far more than a reconstruction two years later — and under Making Tax Digital the underlying records have to be digital anyway. See the MTD guide for what that means in practice.
The property income allowance is £1,000 and has applied since 6 April 2017. It works in two different ways depending on which side of £1,000 you are on.
A landlord lets a lock-up garage for £1,800 a year and incurs £400 of costs on it. Claiming actual expenses leaves £1,400 taxable. Claiming the allowance instead leaves £800, so the allowance is worth £600 of taxable income here. If the garage produced £900 instead, the income would be covered in full and would not need reporting at all. Figures are illustrative.
Now the two traps, both of which are absolute:
Rent a Room gives £7,500 a year of tax-free income from letting furnished accommodation in your own home. Where the income is shared with someone else the threshold is halved to £3,750 each. It covers resident landlords with lodgers, and people running bed and breakfast or guest house accommodation in their own home.
Two limits matter. The accommodation must be furnished and in your own home — HMRC states you cannot use the scheme for homes converted into separate flats. And the mechanics differ either side of the threshold: below it the relief is automatic and nothing needs to be done, while above it you opt in, or opt out, on your tax return.
A lodger pays £800 a month, so £9,600 a year. A sole owner opting in is taxed on £9,600 − £7,500 = £2,100.
If the home is owned jointly and the income shared equally, each owner has £4,800 and a halved threshold of £3,750, leaving £1,050 each — £2,100 between them. Sharing the income does not increase the relief, because the threshold halves at exactly the same time. Figures are illustrative.
Above the threshold, opting in is not automatically the right answer. If the real costs of the letting exceed £7,500 you may be better off outside the scheme, computing the profit in the ordinary way. It is a yearly decision, not a permanent one.
The largest single cost most landlords carry stopped being an allowable expense on 6 April 2020. Individual landlords of residential property get a basic rate tax reducer instead, worth 20% of the lowest of the unrelieved finance costs, the property business profits, and adjusted total income exceeding the personal allowance. From 6 April 2027 the reducer is given at the property basic rate of 22%.
Putting mortgage interest in the expenses box is one of the more common and more expensive errors on a landlord tax return, because it understates the property profit and the reducer at the same time. The Section 24 guide covers the calculation in full.
For spouses and civil partners, income from jointly held property is taxed 50:50 by default under section 836 ITA 2007 — regardless of who paid for what, and regardless of what would suit you.
A Form 17 declaration under section 837 ITA 2007 can override the default, but only within tight limits:
The 60-day rule is the one that catches people. A declaration signed and then posted six weeks later with a covering letter is often already out of time by the day it is opened.
Since 1 April 2020, landlords in England and Wales cannot let or continue to let a property covered by the MEES Regulations with an EPC rating below E. There is a cost cap of £3,500 including VAT, and exemptions must be registered on the PRS Exemptions Register, which is publicly searchable and shows the penalties issued. Penalties run to £2,000 for a non-compliant let of under three months, £4,000 for three months or more, £1,000 for false information on the register, and a maximum of £5,000 per property.
On 21 January 2026 the government confirmed that private landlords in England and Wales will have to meet a higher standard, equivalent to EPC band C, by 1 October 2030, with a cost cap of £10,000 per property. Spending on recommended improvements from 1 October 2025 counts towards that cap. The regulations still have to be made, and until the new standard applies the minimum you must meet is band E. Whichever standard the work is for, the tax treatment turns on whether it restores the property or improves it.
We code every property cost as it arrives rather than at the year end, so replacements, improvements and fixtures are separated while the invoice is still in front of us, and the capital items are carried forward to the eventual sale instead of being lost. It runs through property bookkeeping into the tax return. If you are letting for the first time, start here.
What has changed in landlord tax, the dates coming up, and one number worth checking on your own portfolio.
If it replaces one that was already there, usually yes, under replacement of domestic items relief in section 311A ITTOIA 2005. If it is the first one you have put in the property, no — the relief covers replacement, not initial purchase, which is why furnishing a property before the first tenancy generally gets nothing under it. Where the replacement is like for like you claim the full cost of the new item. Where it is an upgrade, relief is limited to the lesser of what you spent and what an equivalent replacement would have cost, so a £520 washer-dryer replacing a £340-equivalent washing machine gives £340. Note the equivalent cost at the time of purchase.
It is a £1,000 allowance against property income that has applied since 6 April 2017. If your property income is £1,000 or less you get full relief and do not need to report it. Above £1,000 you can deduct the £1,000 instead of your actual expenses, whichever leaves you better off — it is one or the other, never both. There are two absolute restrictions. You cannot use it if you claim the Section 24 finance cost tax reducer, which rules it out for almost every mortgaged residential landlord, and you cannot use it against rent-a-room income. It suits small unmortgaged sources such as a garage or a parking space.
No. The relief expressly excludes fixtures, and HMRC gives baths, toilets, fitted furniture and boilers as its examples of what that means. Replacement of domestic items relief is for moveable items — furniture, furnishings, household appliances and kitchenware. That does not automatically mean the spending gets no relief at all, because replacing a failed boiler with an equivalent one is capable of being a deductible repair on ordinary principles, but it is a different question answered on different grounds. What matters is not claiming it under section 311A, because the treatment is wrong even where a deduction was genuinely due.
£7,500 a year under Rent a Room relief, or £3,750 each if the income is shared with someone else. It applies to furnished accommodation in your own home and covers resident landlords with lodgers as well as bed and breakfast or guest house accommodation run from your home. HMRC is clear that you cannot use the scheme for a home that has been converted into separate flats. Below the threshold the relief is automatic and you do not need to do anything. Above it you opt in, or opt out, on your tax return each year, and opting in is not always better — if your real costs exceed £7,500 you may prefer to compute the profit normally.
No. Income from property held jointly by spouses or civil partners is taxed 50:50 by default under section 836 ITA 2007, whatever each of you contributed. A Form 17 declaration under section 837 can override that, but only where the beneficial interests really are unequal and the declaration reflects the true position — it is not a mechanism for choosing a split. It must be made jointly, so one spouse refusing leaves the 50:50 default in place. It must reach HMRC within 60 days of the date of the declaration, and there is no power to extend that. And it only covers income arising after the declaration date.
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