Revenue expenses
Revenue expenses are the day-to-day running and maintenance costs of a rental business that can be deducted against rental income to reduce taxable rental profit in the year they are incurred. For most self-managing landlords they make up the majority of their annual tax deductions. HMRC's Property Income Manual sets out the governing framework: to be deductible, an expense must be incurred wholly and exclusively for the purposes of the property rental business, and must not be capital in nature.
The "wholly and exclusively" test
Every allowable expense must pass HMRC's "wholly and exclusively" rule. This means the expenditure must have been incurred solely for the purposes of the rental business, not for any personal benefit. Where an expense has a dual purpose, the private element is disallowed. In practice, many common costs pass this test without difficulty: insurance premiums on the let property, letting agency fees, repairs carried out between tenancies, and accountancy fees for preparing rental accounts. Where there is a private element, for example, a landlord who uses a personal mobile for both tenant calls and personal use, only the demonstrable business proportion is deductible.
Revenue expenses versus capital expenditure
The most important boundary in landlord tax is the distinction between revenue and capital improvements. Revenue expenditure maintains the property in its existing condition. Capital expenditure improves, enhances, or adds to it. Only revenue expenditure is deductible against rental income in the year it arises. Capital costs instead increase the property's base cost for capital gains tax purposes, providing relief on eventual disposal rather than immediately.
The line between the two is not always obvious, and HMRC scrutinises it closely. Replacing a broken boiler with a similar model is revenue expenditure. Replacing a dated central heating system across the whole property with a new system where the existing one functioned, or was adequate, is more likely to be capital. Repainting walls between tenancies is revenue. A full refurbishment that materially improves the condition of a newly acquired property may be capital, particularly where the purchase price was reduced to reflect the property's poor state. Replacing single-glazed windows with double-glazed equivalents has historically been treated as revenue by HMRC on the basis that it is the nearest modern equivalent, though this remains a grey area in some circumstances.
What qualifies as a revenue expense
The main categories of allowable revenue expenditure for residential landlords are:
General repairs and maintenance: fixing a broken boiler, mending a roof leak, repainting between tenancies, repairing gutters, replacing broken fixtures. The cost must be restoring the property to its existing standard, not improving beyond it.
Letting agent and management fees, accountancy fees, and legal costs for revenue matters (such as chasing rent arrears or renewing a short tenancy). Legal costs relating to acquiring a property or granting a long lease are capital.
Insurance: landlord buildings insurance, contents insurance, and rent guarantee insurance are all allowable revenue expenses.
Safety and compliance costs: gas safety checks, EICR, fire alarm servicing, and property inspections are allowable running costs.
The Replacement of Domestic Items Relief: landlords can deduct the cost of replacing domestic items, including furniture, appliances, kitchenware, on a like-for-like basis. The replacement must be of broadly similar quality; any upgrade element is not deductible. Any proceeds from disposing of the old item must be deducted from the claimed amount.
Mortgage interest: since April 2020, mortgage interest is no longer deductible as a revenue expense in the conventional sense. Individual landlords instead receive a 20% basic rate tax credit on finance costs under the Section 24 restriction. This is fundamentally different from a deduction, it reduces the tax bill rather than the profit, and the practical effect depends heavily on the landlord's marginal rate of tax. Companies letting property are not subject to this restriction and can still deduct interest in full.
Travel costs: journeys to and from let properties for business purposes (inspections, attending to repairs) are deductible on the business proportion. Travel from home to a let property is not automatically allowable if the landlord's home is not their business base.
What does not qualify
Capital expenditure cannot be deducted as a revenue expense. Common misclassifications include: adding an extension or loft conversion; fitting an entirely new kitchen or bathroom where the previous one was functional; structural improvements such as full rewiring; purchase costs including stamp duty and legal fees on acquisition; and any item that substantially improves the property's value or condition beyond its previous standard.
Expenses that are not wholly and exclusively incurred for the rental business are also disallowed, either in full (where the business and personal elements cannot be separated) or partially (where they can be apportioned).
Record-keeping and Making Tax Digital
HMRC requires landlords to keep records of all income and expenditure for at least five years after the Self Assessment filing deadline. Revenue expense records, invoices, receipts, letting agency statements, insurance schedules, are particularly important given that HMRC actively enquires into the capital/revenue classification of repair and maintenance costs.
Under Making Tax Digital for Income Tax, quarterly digital submissions of income and expenses will be required from April 2026 for most landlords. August's expenses tracking supports categorisation, digital storage of receipts, and the quarterly reporting workflow required for MTD compliance.
Under the Renters' Rights Act 2025, higher rental standards and Awaab's Law are likely to increase ongoing revenue spending on maintenance, compliance checks, and inspections. These remain normal allowable business costs. For a full categorisation guide covering common grey-area decisions, see our landlord expense categorisation guide.
Frequently asked questions
What is the difference between revenue expenses and capital expenses for landlords?
Revenue expenses maintain the property in its existing condition and are deductible from rental income in the year they are incurred. Capital expenses improve or enhance the property and cannot be deducted from rental income, instead they reduce a landlord's capital gains tax liability when the property is eventually sold by increasing the property's base cost.
Can I deduct mortgage interest as a revenue expense?
Not in the same way as other expenses. Individual landlords subject to income tax cannot deduct mortgage interest directly from rental income. Instead they receive a 20% basic rate income tax credit on finance costs under the Section 24 restriction. Companies letting property are not subject to this restriction and can still deduct interest as a revenue expense in full.
What is the Replacement of Domestic Items Relief?
This is the relief that allows landlords to deduct the cost of replacing domestic items, including furniture, white goods, kitchen equipment, in let residential properties. The replacement must be like-for-like or the nearest modern equivalent of similar quality. Any improvement element beyond the original item is not deductible. The relief replaced the old wear-and-tear allowance from April 2016.
