Capital allowance
A capital allowance is a type of tax relief that lets you deduct certain capital spending from your taxable profits, instead of treating it as an ordinary day-to-day expense. For most “normal” residential rental property letting, capital allowances are more limited than many landlords assume.
The big restriction is that, for an ordinary UK rental business, spending on plant or machinery “for use in a dwelling-house” is generally not qualifying expenditure. This is set out in section 35 of the Capital Allowances Act 2001 and reflected in HMRC guidance. In other words, you usually cannot claim capital allowances for things like fitted kitchens, white goods or furniture inside a typical let property. HMRC notes that, outside furnished holiday lettings, capital allowances cannot be claimed on furniture and furnishings in an ordinary property rental business.
Instead, many landlords rely on replacement of domestic items relief when they replace like-for-like items provided to a tenant, for example, replacing a sofa or fridge, subject to certain conditions.
There are still scenarios where capital allowances can apply to landlords, such as certain assets used in running the rental business, or plant in common parts of blocks of flats rather than “in” the dwelling itself, and some structures-related reliefs depending on facts. HMRC’s help sheet on capital allowances explains the broader framework and balancing adjustments when assets are disposed of.
A “watch-out” is the special furnished holiday lettings rules were removed from 6 April 2025, changing how capital allowances interact with that type of letting, including balancing adjustments where relevant.
For landlords, the practical takeaway is to separate repairs, usually revenue from improvements, often capital. You must keep good records for quotes, invoices, and inventory, and take tax advice for edge cases.
Also see our Making Tax Digital page and read our landlord blog articles on:
Also see our free landlord calculators
