If you own a rental property, big repairs are almost inevitable — whether it’s replacing a roof, fixing subsidence, or tackling structural damage. Naturally, landlords want to know: can these costs be deducted when working out rental profits?
The answer depends on whether the work counts as revenue (deductible) or capital (not immediately deductible).
Revenue vs Capital – What’s the Difference?
The key test is whether the work simply restores the property to its original condition, or whether it significantly improves it.
- Revenue expenditure – Day-to-day or like-for-like repairs that maintain the property. These are deductible against rental income.
- Capital expenditure – Significant improvements or alterations that enhance the property’s value. These are not deductible as repairs.
Example: Replacing a roof with a like-for-like version = revenue (deductible). Installing a brand-new, higher-spec roof = capital (not deductible as revenue).
Repairs HMRC Accept as Revenue
HMRC generally allow the following to be treated as revenue expenses:
- Replacing roof slates, flashing, or gutters
- Exterior painting and decorating
- Stone cleaning and repointing
- Mending broken windows, doors, or furniture
- Repairing or replacing appliances
In short, if the work simply keeps the property in good condition, you should be able to claim it.
When Repairs Become Improvements
Sometimes, improvements happen by default because modern materials are better than the old ones. HMRC accepts this.
Example: Replacing wooden beams with steel girders = still treated as revenue, because the improvement comes from technological advances.
However, if the repair goes further and uses superior materials to significantly upgrade the property, it becomes capital expenditure. The same applies if you extend a property rather than just repair it — that’s an improvement, not a repair.
Relief for Capital Costs
How capital costs are treated depends on the accounting method:
- Accruals basis – Capital expenditure isn’t deductible. Relief is given through capital allowances (where available) or by offsetting costs against the capital gain on sale.
- Cash basis – Some capital costs can be deducted, but not for residential property improvements or non-depreciating assets like buildings. Again, the main relief comes when calculating the capital gain on disposal.
Final Thoughts
The line between a repair and an improvement isn’t always straightforward — but it matters, because it determines whether you get immediate tax relief or only relief on sale.
Need Help With Property Repairs and Tax?
At Jon Davies Accountants, we’ll help you work out what’s deductible, how best to structure your property expenses, and how to stay compliant with HMRC’s rules.
Contact Jon and the team today to get expert advice on making the most of your rental property tax reliefs.
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