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Allowable Expenses
Mortgage Interest (Section 24)
Section 24 Impact: Basic vs Higher Rate
Frequently Asked Questions
What expenses can a landlord deduct from rental income in 2026?
Allowable expenses include letting agent fees, repairs and maintenance, landlord insurance, ground rent and service charges, accountancy fees, advertising costs, utilities paid during void periods, and other genuine business expenses. Mortgage interest is no longer deductible — instead you receive a 20% tax credit under Section 24.
How does Section 24 mortgage interest restriction work?
Since April 2020, landlords can no longer deduct mortgage interest from rental income before calculating tax. Instead, you receive a tax credit equal to 20% of your mortgage interest. This means higher-rate taxpayers effectively lose 20% extra tax on their mortgage interest costs compared to the old system.
Can I deduct the cost of improvements to my rental property?
No — capital improvements (such as adding an extension or fitting a new kitchen where none existed) are not allowable expenses against rental income. However, like-for-like replacements and repairs are allowable. Capital expenditure may qualify for Capital Gains Tax relief when you eventually sell.
What is the difference between repairs and capital improvements?
Repairs restore the property to its original condition and are fully deductible — for example, fixing a broken boiler or repainting walls. Capital improvements enhance the property beyond its original state — for example, converting a loft into a bedroom — and are not deductible against rental income but may reduce CGT on sale.
Do I need to complete a Self Assessment tax return as a landlord?
Yes, if your rental income exceeds £1,000 per year (the property income allowance threshold), you must register for Self Assessment and report your rental profits to HMRC. You must file by 31 January following the tax year end (5 April). Keep records of all income and expenses for at least 5 years.