Letting agent fees for landlords: what you’re paying for, and how to check them

Search for letting agent fees and you’ll find pages written for someone choosing an agent. This one is for the landlord who already has one, and sees the fees arrive as deductions on a monthly statement. It covers what agents charge for, what the law makes them tell you, where each fee shows up, how to check the commission is right, and which fees you can claim against tax.

The three levels of service

Agents sell their services as packages, and they come in three broad levels. The names vary; what each level covers doesn’t much.

Let only, or tenant find. The agent markets the property, does viewings, references the tenant and sets up the tenancy, then hands over. Charged once, as a fixed fee or a percentage of the first months’ rent. After that the tenant pays you directly, so there’s usually no monthly statement at all.
Rent collection. Tenant find, plus the agent collects the rent each month, chases late payments and sends you what’s left with a statement. You still deal with repairs yourself.
Full management. All of that, plus the agent handles maintenance, arranges safety certificates, does inspections and deals with the tenant day to day. Charged as a monthly percentage of the rent, on top of a tenant-find fee.

The percentage for each is set in your terms of business, the agreement you signed with the agent. If you can’t find your copy, ask for it. Every check below starts from that document.

The fees on top

The monthly percentage is the headline. The extras are where agents differ most, and where a statement can surprise you. The common ones:

Tenancy set-up or admin fee - drawing up the agreement, often charged with each new tenant.
Referencing - credit and background checks on the tenant, sometimes per person.
Inventory, check-in and check-out - the record of the property’s condition at each end of a tenancy.
Renewal fee - when the same tenant signs on for another fixed term.
Deposit registration - protecting the tenant’s deposit in a government-approved scheme.
Arranging certificates and works - the gas safety check, the electrical report, the EPC. Some agents add an arrangement fee or a percentage on top of the contractor’s invoice. Each renewed certificate also has to go on the new PRS database within 28 days. The agent can upload it for you, but the responsibility stays with you.
Annual or tax statement - a year-end summary, which some agents include and some charge for.

Why are these now on your statement rather than the tenant’s? Because since 1 June 2019 the Tenant Fees Act has banned most charges to tenants in England, and Wales brought in its own ban from 1 September 2019. Costs that used to be split, like referencing and setting up the tenancy, generally fall on the landlord now.

VAT, and what the law makes agents publish

If your agent is VAT registered, every fee carries 20% VAT. That matters more than it sounds. A management fee of 12% of the rent is really 14.4% once the VAT is added, and on £1,000 a month that’s £144, not £120.

The law is on your side here. Under the Consumer Rights Act 2015, a letting agent has to publish a full list of its fees, both on its website and somewhere visible in its office. The list has to:

Show each fee including VAT, or, where the amount can’t be known in advance, such as a percentage of rent, explain how it’s calculated.
Say what each fee is for, clearly enough that the person paying can understand it. The official notes to the Act give the example of an “administration fee” with no explanation, and say that isn’t enough.

Local trading standards enforce this and can fine agents who don’t comply. In practice it means two things for you: you can compare agents on a like-for-like, VAT-inclusive basis, and any fee on your statement that isn’t on the published list or in your terms is worth a polite question.

Where the fees show up on your statement

Agents lay statements out differently, but fees tend to appear in one of a few ways:

A commission line each month, in the expenditure section. The VAT may be a separate line underneath or a separate column alongside.
Netted off the rent, with no separate line at all. The rent figure is already lower than the rent on the tenancy agreement. You need the gross figure for your tax return, so ask for it.
A large one-off deduction in the month a tenancy starts or renews - the tenant-find, set-up and referencing fees together. Big enough that landlords sometimes query it as a mistake.
Folded into a contractor line, where the agent has added its arrangement fee to the cost of a repair or a certificate. One line, two things.

The guide to reading a letting-agent statement covers the rest of the document, line by line.

How to check your agent’s commission

You don’t need to audit every month. A once-a-year check against your terms of business is enough to catch an overcharge, and it takes about as long as a cup of tea per statement:

Find the rate in your terms - say 12% plus VAT - and check whether it’s charged on rent due or rent received. If it says received, there should be no commission on a month the tenant didn’t pay.
Multiply. Rent received times the rate, plus 20% VAT, should equal the fee line. On £950 received at 12% plus VAT, that’s £114 plus £22.80, or £136.80.
Look at the arrears months. If rent was late and arrived in a later month, the commission should follow the money, not appear twice.
Check the one-offs against the published fee list - renewal fees in particular, since they can appear on a renewal you didn’t ask for.
Add up the year. Total fees over total rent gives you the rate you actually paid, extras included. It can be noticeably higher than the headline percentage, and it’s the honest figure to compare when you think about switching agents.

If something doesn’t match, ask the agent before assuming the worst. The innocent explanation is often timing: a fee for one month charged in the next, or a rent payment split across two statements.

Which letting agent fees are tax deductible?

Most of them, and they’re among the cleanest deductions you have. Management commission, rent collection fees, tenant-find fees on a let of a year or less, renewal fees, inventories and referencing all count, and so does the VAT on them if you’re not VAT registered. On the UK property pages of a tax return they go in the box for legal, management and other professional fees.

Two exceptions worth knowing:

The first letting of a property for more than a year. HMRC’s manual treats the costs of a first letting for more than a year, including “agent’s and surveyor’s fees and commission”, as capital, so they can’t be deducted from rent. Lets of a year or less, and the normal costs of renewing, are fine.
Buying or selling the property. Legal and agent fees on a purchase or sale are capital. They matter for Capital Gains Tax when you sell, not for your rental profit.

The allowable expenses guide has the full list of what you can claim and where each cost sits on a statement, and how tax on rental income is worked out shows what those deductions are worth once they come off your profit.

Questions people ask

How much do letting agents charge landlords?

There’s no standard rate. Each agent sets its own, usually as a one-off fee for finding a tenant plus, for a managed let, a monthly percentage of the rent. What you can rely on is that the agent has to publish a full list of its fees, including VAT, on its website and in its office - so compare those lists, not the headline percentage, because the extras are where agents differ most.

Do letting agents charge VAT on their fees?

If the agent is VAT registered, yes - 20% on top of the fee. The law says the fees an agent publishes must be shown including VAT, so a quoted 12% that’s really 14.4% once VAT is added should be displayed as 14.4%. On your statement the VAT is often a separate line or a separate column next to the fee.

Can a letting agent charge the tenant instead?

Mostly not any more. Since 1 June 2019 the Tenant Fees Act has banned most fees to tenants in England, and Wales brought in its own ban from 1 September 2019. Charges that used to be split - referencing, setting up the tenancy - now generally fall on the landlord, which is why they appear on your statement.

Are letting agent fees tax deductible?

Generally yes: management commission, tenant-find fees on a let of a year or less, renewal fees, inventories, and the VAT on all of them if you’re not VAT registered. They go in the box for legal, management and other professional fees on the property pages. The exceptions are fees on the first letting of a property for more than a year, which HMRC treats as capital, and anything to do with buying or selling the property.

Why is the rent on my statement lower than the rent on the tenancy?

Usually because the agent has taken its commission off before the rent line, so there’s no separate fee row. It can also be a part-paid month, rent still in arrears, or a different period. Ask the agent for the gross rent - you need it for your tax return, because you report rent and fees separately, not the difference between them.

Before you rely on any of this

This explains how letting agent fees generally work; it isn’t legal or tax advice, and your own terms of business are what actually bind you and your agent. For the tax side, see HMRC’s manual on letting costs or ask an accountant.

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