If you’re a landlord, your tax return can feel simple on paper: rent comes in, bills go out, and you tell HMRC what’s left. In real life, it’s rarely that tidy. One month you’re dealing with void periods and repairs, the next you’re replacing furniture, paying agent fees, or wondering whether that “upgrade” is actually claimable.
And now there’s another big change on the horizon: Making Tax Digital for Income Tax Self Assessment (MTD ITSA). If your combined gross income from self-employment and/or property is over certain thresholds, you’ll need to keep digital records and send updates to HMRC during the year — not just at year-end.
This guide walks you through what normally counts as rental income, what costs are usually allowable, and what you can do now to get ready — without the jargon.
What counts as rental income (it’s not just the monthly rent)
In most cases, rental income includes any money you receive because you let out your property. That usually starts with rent, but can also include extras you charge the tenant for.
Common examples include:
- Rent payments (weekly/monthly)
- Amounts charged for services you provide (for example, cleaning or gardening if you arrange it)
- Charges you pass on (for example, utilities) where you’re the one collecting the money
- Certain payments linked to the tenancy (depending on what they’re for)
The simplest habit to build: treat your property like a mini business. Keep a clean record of everything coming in and what it relates to. If you want a practical starting point, use this as your baseline: Guide to Rental Income and Expense.
The basic landlord tax maths (and why it matters)
Your taxable position is generally built on this:
Rental income – allowable expenses = taxable rental profit
That profit is then taxed at your marginal income tax rate, based on your total income for the year.
So the real difference between a calm January and a stressful one is usually the quality of your records — and whether you’re claiming what you’re entitled to (without claiming things that will cause problems later).
If you prefer having someone handle the return end-to-end, this is what we do: Tax Return.
Allowable costs: what you can usually claim (and the classic mistakes)
“Allowable” normally means the cost was wholly and exclusively for running your rental business. Here are the costs landlords most commonly track.
1) Letting agent and management fees
Agent fees, tenant-find fees, and ongoing property management costs are usually claimable as revenue expenses.
2) Repairs and maintenance (but not improvements)
This is the big one. Repairs generally mean restoring something to its previous condition — like fixing a leak, replacing broken items, or redecorating to put things back as they were.
Where landlords slip up is when a job is more than a repair. If you improve the property beyond its original standard (for example, a significant upgrade rather than a like-for-like replacement), it may be treated differently for tax.
3) Insurance
Landlord insurance, buildings insurance (where you pay it), and liability cover are commonly claimable.
4) Safety and compliance costs
Gas safety checks, electrical checks, and other compliance-related costs are often part of running the property, so they’re commonly deductible where relevant to your situation.
5) Services you pay for
If you pay for gardening, cleaning of communal areas, maintenance contracts, or similar services (because they’re part of what you provide as a landlord), those costs can often be allowable.
6) Replacement of domestic items (for furnished lets)
If your property is furnished, there are rules that can allow relief when you replace existing domestic items (like furniture or appliances). The key point: it’s generally about replacement, not the initial furnishing of the property.
7) Professional fees (when they relate to the letting)
Some professional costs connected to running the letting (not buying the property) can be allowable. If it’s linked to purchasing or selling, it often falls into a different category.
If your costs are scattered across different accounts and receipts, it’s worth getting your bookkeeping sorted before you do anything else. That’s exactly what our Book Keeping service is for.
Mortgage interest: expect it to be different from “normal expenses”
A lot of landlords assume mortgage interest is simply deducted like any other cost. For many residential landlords, it doesn’t work that cleanly. The rules can restrict how mortgage interest relief is given, and it can affect your effective tax position.
That’s why you’ll sometimes see landlords shocked at their tax bill even when they “didn’t really make much profit” after the mortgage.
If you want a clearer view of your numbers (especially if you’ve got multiple properties), setting up proper reporting helps. See: Financial Reports.
What you should keep records of (so your return is quick and accurate)
If you only do this once a year, you’ll miss things. If you do it monthly, it becomes easy.
At a minimum, keep:
- Rent received (with dates and which property it relates to)
- Letting agent statements
- Receipts/invoices for repairs, maintenance, and services
- Insurance documents
- Loan statements and interest info (where relevant)
- Notes for anything unusual (void periods, large works, tenant reimbursements)
If you need a simple home for it all, cloud software makes life easier — especially with MTD ITSA approaching. If you’re using QuickBooks (or want to), our Quickbooks Accountants team can get it set up properly.
Preparing for MTD ITSA: what’s changing and when
MTD ITSA is a change to how many landlords and sole traders report income tax. Instead of doing everything annually, you’ll keep digital records and send updates during the tax year using compatible software.
The rollout is based on your qualifying income (gross income) from self-employment and/or property:
- Over £50,000 (based on the 2024–2025 tax year): required from 6 April 2026
- Over £30,000 (based on the 2025–2026 tax year): required from 6 April 2027
- Over £20,000: the government has set out plans to introduce legislation to lower the threshold further in a later phase
If you hold property inside a limited company, that’s a different system (corporation tax), and MTD ITSA isn’t aimed at company filings in the same way. Most landlords we speak to, though, are dealing with personally owned buy-to-lets — and that’s where the admin shift is landing first.
If you want a broader view of what we do (beyond landlord returns), start here: Services.
Your practical MTD prep checklist (so it doesn’t take over your life)
Here’s the approach that keeps things simple:
- Stop relying on a January catch-up
Do 20–30 minutes a month instead. Your future self will thank you. - Separate your property money
A dedicated bank account for rental income/expenses makes everything cleaner. - Use software that supports digital records
This is the direction HMRC is pushing. You’ll feel the benefit even before MTD becomes mandatory for you. - Get your categories right from day 1
If you categorise repairs, agent fees, insurance, and replacements properly throughout the year, your return becomes straightforward.
If you want helpful resources to keep you organised, you can also use: Useful Links & Forms and Help & Resources.
Ready to get your landlord tax sorted (and MTD-ready)?
If you want your landlord tax return done properly, your allowable costs captured correctly, and a simple setup ready for MTD ITSA, we’ll get you organised without the stress.
Head to Contact Us and tell us how many properties you’ve got, roughly what you earn in rent each year, and whether you’re already using any accounting software. We’ll take it from there.
