4 min read · Updated 2026-06-17
You only pay tax on your rental profit, not your rent. Profit is your rental income minus your allowable expenses — so knowing what counts is the difference between an accurate bill and overpaying. Here's the plain-English version for UK residential landlords.
The general rule is that a cost is allowable if it's incurred wholly and exclusively for renting out the property. Common examples include:
This is where landlords trip up. Restoring something to its original condition is a repair and is allowable now. Upgrading or adding something — a new extension, or replacing single glazing with double glazing beyond a like-for-like repair — is capital improvement, which isn't an everyday expense but may reduce Capital Gains Tax when you sell. Like-for-like replacement of a worn-out item is usually a repair.
Mortgage interest is not an ordinary allowable expense. Under Section 24 you can't deduct it from your rental income; instead you get a 20% basic-rate tax credit on it. For higher-rate landlords this is less generous than a full deduction — we cover why in our Section 24 guide.
If your rental income is small, the £1,000 property allowance may be simpler than claiming expenses: the first £1,000 of property income is tax-free, and if you claim it you don't deduct actual expenses. If your costs are higher than £1,000, claim the expenses instead.
Plot's free calculator lets you enter your rent, costs and mortgage interest and shows your real rental profit and tax — with the Section 24 credit handled for you.
A like-for-like replacement of a worn-out kitchen is usually an allowable repair. Upgrading to a substantially better kitchen is a capital improvement, which isn't an everyday expense but may reduce Capital Gains Tax when you sell.
The first £1,000 of property income each year can be received tax-free. If you claim the allowance you don't also deduct actual expenses, so it's best when your real costs are under £1,000.
No longer as a deduction. Under Section 24 you receive a 20% basic-rate tax credit on finance costs instead, rather than subtracting them from rental income.