Rental Property Repairs: What’s Deductible and What’s Not?

Tax Treatment of Major Repairs on Rental Properties

Managing a rental property often involves tackling major repair jobs — from replacing a roof to dealing with subsidence. Naturally, landlords want to know whether these costs can be deducted when working out taxable rental profits. The key lies in understanding whether the expenditure is capital or revenue in nature.

Capital vs Revenue Expenditure

The distinction between capital and revenue is not always straightforward.

• Revenue expenditure: Generally covers repairs that restore the property to its original state. For example, a like-for-like roof replacement is considered revenue and therefore deductible.

• Capital expenditure: Applies when work enhances or significantly improves the property rather than just repairing it. Installing a much higher-specification roof, or extending the property instead of repairing a wall, would fall into this category.

What HMRC Accepts as Revenue Repairs

HMRC recognises certain types of repairs as revenue in nature, meaning landlords can usually claim a deduction. These include:

• Replacing roof slates, flashing, or gutters

• External painting and decorating

• Stone cleaning and repointing

• Repairing broken windows, doors, furniture, or appliances

When Repairs Become Improvements

Sometimes, repairs lead to improvements. HMRC provides some flexibility here:

• Modern materials: If improvements arise only because newer, better materials are used (e.g., replacing wooden beams with steel girders), HMRC still treats the cost as revenue.

• Significant upgrades: If superior materials or substantial alterations are made, the work is classed as capital.

Relief for Expenditure

Under the Accruals Basis

• Revenue costs: Deductible in full when calculating rental profits.

• Capital costs: Not deductible, but relief may be available through capital allowances or when calculating gains on disposal.

Under the Cash Basis

• Revenue costs: Deductible as normal.

• Capital costs: In most cases, landlords cannot deduct capital expenditure on residential buildings. However, the expenditure may reduce capital gains liability when the property is sold.

✅ Key takeaway: Ordinary repairs and maintenance are generally deductible as revenue expenses. Significant improvements, however, are capital in nature and may only offer relief when you dispose of the property.

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