Landlords:
records, expenses and mortgage interest

If you let out a property in your own name, you pay Income Tax on the profit: the rent you receive less the costs you’re allowed to claim. Getting the expenses right, and knowing how mortgage interest is treated, makes the biggest difference to your bill.

Do you need to tell HMRC?

The first £1,000 of property income each year is tax-free under the property allowance. If your rental income is more than £1,000 and up to £2,500 a year, contact HMRC. You must report it on a Self Assessment return if it’s more than £2,500 after allowable expenses, or more than £10,000 before them.

If your rent is low and your costs are small, you can deduct the £1,000 allowance instead of your actual expenses. You can’t do both on the same income. If your real costs are more than £1,000, claiming them is usually better.

What you can claim

Allowable expenses are the day-to-day costs of letting. For a residential let they include:

• letting agent and management fees
• legal fees for lets of a year or less, or for renewing a lease for less than 50 years
• accountant’s fees
• buildings and contents insurance
• maintenance and repairs, but not improvements
• utility bills, Council Tax, ground rent and service charges, if you pay them
• services you pay for, such as cleaning or gardening
• other direct costs of letting, such as stationery and advertising
• the business share of vehicle running costs for trips you make for the letting

A repair puts something back as it was, like replacing broken roof tiles. An improvement, like an extension, isn’t an expense against your rent. It may reduce your Capital Gains Tax when you sell instead.

Replacing furniture and appliances. You can claim the cost of replacing items such as beds, sofas, carpets, fridges and televisions. It covers replacing an item, not buying it for the first time.

Mortgage interest

If you own the property personally, you can’t deduct mortgage interest from your rent. Instead you get a tax reduction of 20% of the lowest of:

• your finance costs for the year, plus any brought forward
• your property profits
• your income above your Personal Allowance

Finance costs are the interest and the costs of getting the loan, not the repayments of the loan itself. If the reduction is limited by your profits or income, the unused finance costs carry forward to next year.

For a higher-rate taxpayer this means paying tax on the rent before interest, then getting 20% of the interest back. That’s why landlords’ bills can look higher than expected. Companies that let property are treated differently and can deduct interest as an expense.

Records to keep

Keep rent books or statements, receipts, invoices, bank statements and a mileage log for trips that are only for the letting. Keep them for at least five years after the 31 January deadline for the tax year they relate to.

A separate bank account for the rent and costs makes this much easier, and makes Making Tax Digital simpler if it applies to you. Rent counts towards the qualifying income that decides whether you join it, so see our Making Tax Digital guide.

What’s changing

From 6 April 2027, property income in England, Wales and Northern Ireland is due to have its own rates: 22%, 42% and 47%. Scotland is expected to set its own rates. This doesn’t change 2026/27.

What you need to do

• Keep every receipt and invoice for the property, and a log of letting trips.
• Split repairs from improvements before you work out your profit.
• Total your finance costs separately: they don’t go in with your expenses.
• Compare your real expenses with the £1,000 property allowance and use whichever helps.
• Check whether your rent means you need to file a return or join Making Tax Digital.

Key dates

• 5 October: register for Self Assessment if this is your first year of letting.
• 31 January: online return and payment for the tax year that ended in April.
• 31 July: second payment on account, if they apply to you.
• 6 April 2027: new property income rates are due to start.