HMRC Expense Categories for Landlords

Why expense categories matter

When you submit quarterly updates under Making Tax Digital for Income Tax, HMRC expects your property expenses to be categorised according to the SA105 supplementary pages. These are the same categories used on the Self Assessment tax return for UK property income.

Getting the categorisation right matters. It ensures your quarterly updates are compliant, reduces the risk of errors on your final declaration, and means less back-and-forth if HMRC opens an enquiry. The SA105 has six standard expense categories (boxes 24–29), each covering a specific type of cost.

1. Premises running costs

This category covers the day-to-day costs of keeping a property operational. It includes:

• Insurance premiums (buildings, contents, landlord liability)
• Council tax — only claimable for periods when the property is unoccupied and you are liable
• Business rates (for commercial lettings)
• Ground rent and service charges
• Utility bills (gas, electricity, water) — only where you pay these rather than the tenant
• Rent paid (if you sub-let a property you rent)

If the tenant pays council tax or utilities directly, those costs are not your expense to claim. Only include amounts you are contractually responsible for.

2. Repairs and maintenance

Repairs restore something to its previous working condition. Allowable repairs include fixing a broken boiler, repainting walls, replacing a cracked window with a like-for-like equivalent, plumbing repairs, and patching a roof.

The critical distinction here is between a repair and an improvement. A repair puts something back to the state it was in before. An improvement enhances the property beyond its original condition — for example, adding an extension, converting a loft into a bedroom, or upgrading single-glazed windows to double glazing.

Improvements are capital expenditure. They cannot be claimed as a revenue expense against rental income. However, they may reduce your Capital Gains Tax liability when you eventually sell the property. If you are unsure whether a piece of work counts as a repair or an improvement, the safest approach is to ask your accountant before you file.

3. Financial costs

Financial costs relate to the borrowing and banking expenses associated with your property business. This includes:

• Mortgage interest payments (see Section 24 note below)
• Loan interest on funds used for the property business
• Bank charges on a dedicated property account
• Overdraft fees and interest
• Alternative finance arrangement payments (for Sharia-compliant mortgages)

Section 24 restriction: Since April 2020, residential landlords can no longer deduct mortgage interest as an expense. Instead, you receive a basic-rate (20%) tax credit. This means higher-rate taxpayers pay more tax than they would under the old rules. The restriction applies to residential property only — commercial lettings are not affected. Read our Section 24 guide for more detail.

4. Professional fees

You can claim fees paid to professionals for services directly related to your rental business:

• Accountant and tax adviser fees
• Solicitor costs for tenancy agreement renewals, debt recovery, or eviction proceedings
• Letting agent fees and commission
• Surveyor fees for condition reports or valuations
• Property management company fees

Legal fees for the initial purchase of a property are not allowable here — those form part of the acquisition cost for Capital Gains Tax purposes. Similarly, fees for re-mortgaging are typically not deductible.

5. Cost of services

This covers wages and service costs for people who help you manage or maintain the property:

• Cleaning (between tenancies or communal areas)
• Gardening and grounds maintenance
• Pest control
• Wages for employees (e.g. an on-site caretaker), including employer National Insurance contributions
• Communal area maintenance for blocks or HMOs — lighting, cleaning, refuse collection

If you do the work yourself, you cannot claim the cost of your own labour. Only amounts paid to third parties or employees qualify.

6. Other allowable property expenses

Box 29 on the SA105 is the catch-all category for legitimate costs that do not fit into the five categories above. This includes both travel costs and other miscellaneous expenses:

Travel costs: You can claim the cost of travelling to your rental properties for business purposes — inspections, maintenance visits, collecting rent, meeting tenants, and visiting letting agents or tradespeople. If you use your own vehicle, HMRC's approved mileage allowance rates apply:

• 45p per mile for the first 10,000 business miles in the tax year
• 25p per mile for each mile after that

The journey must be wholly and exclusively for your property business. Commuting from your home to a property you manage full-time may not qualify — HMRC could treat it as ordinary commuting. Keep a log of each journey, noting the date, destination, purpose, and mileage.

Other expenses:

• Advertising for tenants (online listings, signage, printed ads)
• Phone calls and postage related to the property business
• Stationery and office supplies used for record-keeping
• Safety certificates — Gas Safety (CP12), Electrical Installation Condition Report (EICR), Energy Performance Certificate (EPC)
• Landlord association memberships (e.g. NRLA, local landlord forums)
• Tenant referencing and credit check fees you pay directly
• Key cutting and lock changes between tenancies

Consolidated expenses option

If your total annual property income (not profit) is below £85,000, you have the option of reporting a single consolidated expense figure instead of breaking costs down into the six categories above.

This simplifies your quarterly updates — you report one total rather than categorising every receipt. However, there are trade-offs. A consolidated figure gives HMRC less visibility into your costs, which may increase the likelihood of follow-up questions. It also makes it harder for you to spot patterns in your spending or identify errors before your final declaration.

For landlords with straightforward portfolios and low expense volumes, consolidated reporting can be a reasonable choice. For anyone with multiple properties or mixed-use lettings, itemising by category tends to be safer.

Common mistakes to avoid

A few errors come up repeatedly in property tax returns. Avoiding them will reduce your risk of penalties and enquiries:

• Claiming improvements as repairs — This is the most common mistake. If the work enhances the property beyond its original state, it is capital expenditure, not a repair. HMRC auditors look for this specifically.
• Including personal expenses — If you use a phone or vehicle for both personal and property business purposes, you can only claim the business proportion. A 50/50 split is not automatically accepted — you need records to support whatever ratio you claim.
• Deducting mortgage interest as an expense — Since Section 24 took full effect in April 2020, residential mortgage interest is no longer deductible. It must be claimed as a basic-rate tax credit instead. Entering it as a standard expense will overstate your deductions.
• Forgetting to separate personal and property bank accounts — Mixing finances makes it much harder to categorise expenses accurately and to demonstrate compliance.

How Landlo helps

Categorising dozens or hundreds of transactions into the correct SA105 categories every quarter is tedious and error-prone when done manually. Landlo connects to your bank account and uses AI to automatically categorise each expense into the right HMRC category. You review the suggestions, approve them, and submit your quarterly update — without spreadsheets or guesswork.