05/08/2026
All you need to know about tax deductible expenses for new buy-to-lets 😉
New property business 🏠
Furnishings and equipment 🛌
First step - identify the expenditure which does and doesn't count as capital. This determines whether a tax deduction can be claimed against rental income, capital gains or not.
Trap - The first-time cost of providing furnishings and equipment for use by tenants of a residential property is NOT a tax-deductible expense. However, a deduction will be allowed for the cost of replacement items in the future.
Tip - A way to mitigate Trap 1 is to let the property with equipment and furnishings you acquired when you bought the property (it’s a good idea to have the sale/purchase contract list the items). These are likely to cost very little. That way what you spend on replacing them, which you can do soon after the property is on the market for letting (even before the tenant moves in), you’re entitled to a tax deduction for. ✅
Fixtures and fittings 🛀
HMRC’s approach to the cost of replacing boilers, water and light fittings etc. is that they are repairs to the building and therefore the cost of replacing them is usually tax deductible from rental income.
Structural improvements 🧱
Costs incurred on improving/changing the structure of properties, e.g. knocking down walls, converting lofts, is NOT tax deductible from rental income. Instead, it can be deducted when working out any capital gain or loss when the property is sold, as long as the improvement still exists at the time of sale.
Repairs and redecoration 🔨
Normally, the cost of repairs and redecoration is tax deductible from rental income. However, HMRC may think otherwise.
Trap - HMRC may argue that expenditure on repairs and redecoration that’s so significant it constitutes a repair needed to make the property fit for letting, is not tax deductible from rental income. Instead, it says that the same rules for structural improvements apply.
