Tax Relief for Landlords: Claiming Costs for Tenant Damage Explained

Understanding the Issue

Damage to rental properties caused by tenants—or even their pets—is unfortunately common. In many cases, landlords end up paying for repairs themselves. A key question arises: can these repair expenses be claimed for tax relief?

How the Nature of Repairs Affects Tax Relief

Whether tax relief is available depends on the type of work carried out.

Revenue Repairs

If the work simply restores the property to its original condition before the damage occurred, the cost is considered revenue expenditure.
These repair costs can be deducted when calculating the rental business profit, regardless of whether the landlord uses the cash basis or the accruals basis for their accounts.

Replacement of Domestic Items

If damaged domestic items such as furniture, appliances, or white goods need to be replaced, landlords may claim relief under the Replacement of Domestic Items rules.

Tax relief applies to:

• A like-for-like replacement cost

• Delivery and installation expenses

• Costs for disposing of the old item

If the replacement is of higher quality than the original (other than normal technological improvements), the deduction is limited to the cost of an equivalent substitute. If the old item is sold or any proceeds are recovered, these must also be reflected in the calculation.

Improvements vs Repairs

If the work results in a substantial upgrade or improvement—for example, installing a significantly improved kitchen after tenant damage—the cost is treated as capital expenditure, not revenue.

In such cases:

• Relief cannot be claimed as an allowable expense.

• Instead, it is considered for capital gains tax when the property is sold.

• Capital allowances generally do not apply to residential rental properties.

Recovering Costs from Tenant Deposits

If some or all repair expenses are recovered from a tenant’s deposit, the reimbursed amount must be declared as income when calculating rental profits.

Insurance Compensation

Similarly, if damage costs are covered by an insurance claim, insurance payments must be recorded as income for tax purposes.

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