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Allowable expenses for landlords - and where to find them on your agent’s statement

Most guides on allowable expenses give you the list and stop there. The list is the easy half. If a letting agent manages your property, the harder question is where the numbers are - because somebody has already itemised every cost, printed it on a statement, and then folded the whole lot into one net payment to your bank.

So this does both. The list first, because you need it and HMRC is specific about what’s on it. Then the part other guides leave out: where each of those costs actually sits on a letting agent’s statement, what’s printed on there that you can’t claim, and why the total at the bottom isn’t the figure your tax return wants.

What counts as an allowable expense for landlords

HMRC’s test has two parts. The cost has to be wholly and exclusively for the purpose of renting the property out, and it has to be revenue rather than capital - money spent running the place, not money spent improving it. Pass both and you take it off your rental income before you’re taxed on what’s left.

Here’s what that covers on a normal residential let.

• Letting agent fees and management commission. The monthly percentage your agent takes, tenant-find fees, renewal fees, and the VAT charged on them. There’s a section on these further down, because they’re the ones landlords ask about most.
• Repairs and maintenance. Plumbing jobs, a replacement boiler, damp treatment, interior and exterior painting, roof repairs, furniture repairs. HMRC’s own definition is that a repair “restores an asset to its original condition, sometimes by replacing parts of it”. Anything that leaves the property better than it was is an improvement, which is a different thing entirely - see below.
• Landlord insurance. Buildings, contents and public liability policies, and insurance against loss of rent.
• Ground rent and service charges. If you own a leasehold flat you pay these whether the place is let or not, and both are allowable. So are rents you pay if you’re subletting.
• Council tax, water rates, gas and electricity - where you pay them. Common in HMOs, and in void periods on any property. If the tenant pays the bill, it isn’t your expense.
• Legal and professional fees, with a catch that surprises people. HMRC allows “legal fees for lets of a year or less, or for renewing a lease for less than 50 years”. The legal cost of buying the property is capital, and doesn’t belong here at all.
• Safety certificates. Gas safety checks, the electrical installation condition report, the EPC, and the remedial work that sometimes follows one. These show up on agent statements constantly and get missed constantly.
• Costs of services you provide. Communal cleaning, gardening, and the wages of anyone you pay to do them.
• Replacing domestic items. A separate relief with its own rules - covered below.
• Accountancy fees. “Accountant’s fees” is on HMRC’s list in as many words.
• Running costs and travel. Phone calls, stationery, advertising for new tenants, and vehicle running costs - but only the proportion actually used for the rental business.

The one people get wrong: repairs versus improvements

This is the single most common mistake, and it costs money in both directions. A repair restores the property to the condition it was in. An improvement makes it better than it was, and HMRC treats that as capital expenditure. You can’t set an improvement against your rental income at all, though it may reduce your Capital Gains Tax bill when you eventually sell.

Replacing a dead boiler with a similar boiler is a repair. Repointing a wall is a repair; adding an extension is not. Where it gets interesting is the modern equivalent: HMRC accepts that “replacing a part of the property with the nearest modern equivalent is still a repair if the improvement is incidental to the repair, such as replacing a single-glazed window with a double-glazed window”. You’re not expected to source an obsolete part to keep a job classed as a repair. If a job sits on the line, the question to ask is whether you’ve restored something or added something.

Replacing domestic items

There’s a specific relief for replacing the movable things in a let property: furniture such as beds and free-standing wardrobes, furnishings like curtains, carpets and linen, household appliances including fridges, freezers and televisions, and kitchenware down to the crockery and cutlery.

Two conditions catch people. You can only claim for a replacement - the initial cost of furnishing a property isn’t covered. And if the new item is better than the old one, HMRC’s rule is that “if the new item is an improvement on the old item, for example replacing a sofa with a sofa bed, you can only claim a deduction for the cost of buying an item the same as the original”. So you claim what the like-for-like replacement would have cost, not what you actually spent on the upgrade.

The big cost that isn’t an expense: your mortgage interest

Mortgage interest is usually the largest single cost a landlord has, and it is not on the list above. It hasn’t been since 6 April 2020, when the restriction on residential property finance costs came fully into force after a four-year phase-in.

Here’s how it works now. The capital repayment part of your mortgage payment was never claimable. The interest part was deductible from rental profits, and now isn’t. Instead it gives you a basic rate tax reduction - currently 20% - applied against your final tax bill rather than taken off your rental income. HMRC’s wording is that relief “is being restricted to the basic rate of Income Tax”.

For a basic rate taxpayer the arithmetic works out much the same as it used to. For a higher rate taxpayer it doesn’t, and that’s the whole point of the change: your taxable profit is now calculated before any interest comes off, which can push you into a higher band on rental income you never actually kept.

And here is the honest limit of everything else on this page: your mortgage interest will never appear on your agent’s statement. The agent doesn’t pay your mortgage, so they have no way of knowing what it costs. That figure comes from your lender’s annual interest certificate, and you have to fetch it yourself. No amount of reading the statement carefully will produce it.

Where these costs actually appear on a letting agent’s statement

Now the part that other guides don’t cover. If your property is agent-managed, most of the list above has already been itemised for you - it’s sitting in a PDF in your inbox. The problem is that no two agents lay it out the same way, and the layout hides things.

Nearly every statement has two halves: money in and money out. The money-out half is where your expenses live, and it goes by a dozen different names - Expenditure, Payments, Costs, Deductions, Disbursements, Charges. Some agents use a single column with negative figures. Some use two columns. Some print a running balance down the right-hand side that has nothing to do with your tax position at all.

Here’s a simplified single-let statement, with invented figures, laid out the way a lot of them read. If you’ve got one in front of you, this is worth reading alongside it.

A composite example with invented figures. It isn’t any real landlord’s statement.

Four allowable expenses are in there - the commission, the VAT on it, the gas safety check and the plumbing job - totalling £384. That part is straightforward. Three things about the layout are not.

One ledger row is often several invoices

The £138 contractor line looks like one job. It might be two: a £48 call-out and a £90 charge for parts and labour, invoiced separately by the plumber and combined by the agent into a single row on your statement. Some agents attach the underlying invoices as extra pages at the back, which is where this gets confusing - you can end up looking at a £138 ledger row and two invoices for £48 and £90, and it is not obvious whether that’s £138 of cost or £276.

It’s £138. The ledger row is the thing that actually moved money out of your account. The invoices behind it are supporting paperwork explaining what the £138 was for. Count the row, keep the invoices. If you count both, you’ve doubled a cost, and the statement won’t stop you - it balances perfectly either way, because the invoices were never part of the arithmetic in the first place.

VAT is often in its own column

In the example the commission and its VAT are two separate lines, which is easy to read. Plenty of agents instead print the fee net, with the VAT in a column of its own further across the page. Both are perfectly legitimate ways to lay out a statement, and they add up to the same money.

The thing to watch is that in the second layout, the number in the fee column is not what the service cost you. £125 in one column and £25 in another is a £150 expense. Since residential letting is exempt from VAT, most landlords aren’t VAT registered and can’t reclaim that £25 - it’s simply part of the cost, and it belongs in your expenses. Read across the row, not down one column.

The money-in side is not all rent

Look at the second line in the table. The landlord paid £96 in to cover the gas safety certificate, and the agent paid the £96 out to the engineer. To the agent’s cash account that £96 arriving is money in, so it sits in the income half of the statement, right next to the rent.

It is not rent, and it is not taxable income. It’s your own money coming back out of your own pocket. Agents word it in different ways - a credit against a named cost, a landlord receipt, a contribution from owner, a transfer from a maintenance float - and the wording rarely makes it obvious. What gives it away is that a money-in line names a cost or a service rather than rent or a tenant, and it usually mirrors a charge on the expenditure side for exactly the same amount, penny for penny.

This one line is the reason the section after next exists. For a line-by-line tour of everything else you might find on a statement - floats, retentions, arrears, per-room rent on an HMO - there’s a separate guide to reading the whole document.

Are letting agent fees tax deductible?

Yes, and they are one of the cleanest deductions you have. HMRC lists “letting agent fees and management fees” as allowable in the same breath as insurance and accountancy. That covers:

• Management commission - the recurring percentage of the rent, at whatever rate your management agreement sets.
• Tenant-find and letting fees - the one-off charge for advertising, viewings, referencing and drawing up the tenancy agreement.
• Renewal fees - charged when a tenant signs on for another term.
• Inventory, check-in and check-out charges where the agent bills them separately.
• The VAT on all of the above, assuming you’re not VAT registered, which most residential landlords aren’t.

On the statement these nearly always sit in the expenditure section, and the commission is usually the first line in it. Renewal and tenant-find fees can be less obvious - a tenant-find fee sometimes appears as a single large deduction in the month a tenancy starts, big enough that landlords occasionally query it as an error.

One thing worth checking: some agents deduct their commission from the rent before the rent hits your statement, so the “rent received” line is already net of the fee and the fee never appears as its own row. If the rent figure on your statement is lower than the rent on the tenancy agreement and there’s no commission line anywhere, that’s probably what’s happening - and you should ask your agent for the gross figure, because you need both numbers, not the difference between them.

Three things on your statement that don’t belong on your return

Most landlords use cash basis, which is the default and the simpler of the two methods: you count income when it arrives and expenses when they’re paid. That makes three common statement lines misleading, because they look like money and aren’t.

• Arrears, or “rent to be collected”. Rent that’s owed but hasn’t arrived. Statements print it because you need to know about it - it’s a live problem with your tenancy - but on cash basis it isn’t income until somebody pays it. Add it to your rent figure and you’ll be taxed on money you never received.
• Unpaid invoices. The same rule the other way round. A cost your agent has recorded but not yet paid isn’t an expense yet. It becomes one when it’s settled, which may well be in the next statement, or the next tax year.
• Owner contributions. Money you paid in, as described above. Not rent, not income, and not an expense either - the expense is the cost it was paid towards, which is already on the other side of the statement. Count it as income and you’ll overstate your rent.

If you use traditional accounting rather than cash basis, the first two work differently - you’d recognise income and costs when they’re incurred rather than when the money moves. Cash basis is what most landlords are on and what HMRC assumes unless you say otherwise. Owner contributions aren’t income under either method.

Why the total at the bottom isn’t your tax figure

Your statement probably does print an income total. It’s just not the figure your tax return wants. Money you’ve paid in - a contribution towards a gas safety certificate, a transfer from a maintenance float - lands in the income section alongside the rent, because to the agent’s cash account it is money in. It isn’t rent and it isn’t taxable income. The payout at the bottom is still right, so every check the statement makes on itself passes. You just can’t lift the income total onto a return.

Go back to the worked example. The income total is £1,346. Your taxable rent is £1,250. Take the £384 of expenses off the printed total and you get £962, which happens to be exactly the amount paid to your bank - and it is £96 too high, because the contribution has been counted as rent. The statement is not wrong. It is a cash account, and it is correct as a cash account. It just answers a different question from the one your tax return asks.

The payout figure drifts from your taxable profit for other reasons too: an opening balance carried over from last month, a float the agent holds back, rent collected on the 28th and paid out on the 2nd. None of those change what you owe. All of them change what landed in your account.

Getting it out of the PDF

Once you know what you’re looking at, the remaining job is mechanical: get the lines off the PDF, sorted by category, with the rent and the costs separated. There are several ways to do it and a guide comparing them - typing it in, copy and paste, a template, or having the statement read for you. That last option is what RentSorter does: it reads the statement, itemises every line, splits the categories, and checks its own totals against the ones the agent printed.

Whichever route you take, keep the statements. They are your evidence for the expense side of the return, and agents don’t always keep old ones available on their portal.

Questions people ask

What to do with the next statement that arrives

Open it and find three figures before you file it. First, the gross rent - the rent the tenant actually paid, not the amount that reached your bank. Second, the total of the expenditure side, reading across every row so you pick up VAT sitting in its own column. Third, anything in the money-in half that isn’t rent - a credit, a contribution, a transfer from a float - and take it back out of your income figure.

Those three numbers, plus your lender’s interest certificate at the end of the year, are most of a property tax return. When you come to file it, the guide to reporting property income on a Self Assessment return covers which boxes they go in and when it’s due.

Before you rely on any of this

This guide explains how allowable expenses work and where to find them; it isn’t tax advice, and your own circumstances can change the answer. The rules on repairs, capital expenditure and finance costs in particular have real edge cases. Check HMRC’s current guidance on working out your rental income or ask an accountant before you file.