Allowable Expenses & Domestic Items Relief Explained for Landlords 2025/26

Why Knowing the Rules on Expenses Matters

For UK landlords, understanding what counts as an allowable expense — and when Replacement of Domestic Items Relief applies — can make the difference between a smooth HMRC filing and an unwelcome enquiry.

Not all costs qualify. Repairs are deductible, but capital upgrades are not. Replacing a sofa may attract relief, but buying one for the first time does not. HMRC’s rules are clear, but often misunderstood.

This guide explains allowable expenses vs. non-deductible costs, and how domestic items relief works in practice for 2025/26.

What Counts as Allowable Expenses

Allowable expenses are those incurred wholly and exclusively for the rental business. Examples include:

• Repairs and maintenance (e.g. repainting, fixing leaks, replacing broken tiles).

• Insurance, service charges, letting agent and management fees.

• Council tax and utility bills (if paid by the landlord).

What you cannot deduct:

• Capital improvements (e.g. extensions, loft conversions).

• Initial furnishings when first letting a property.

These rules ensure only genuine running costs reduce taxable profit.

Replacement of Domestic Items Relief

Since April 2016, the wear and tear allowance was replaced with domestic items relief.

Relief applies when:

• A landlord replaces an existing domestic item provided for tenant use.

• The old item is no longer available.

• The replacement is a like-for-like or modern equivalent.

Qualifying domestic items include:

• Furniture (beds, sofas, tables).

• Appliances (fridges, freezers, washing machines).

• Soft furnishings (carpets, curtains).

• Kitchenware (pots, pans, crockery).

Not covered:

• First-time purchases.

• Fixtures (built-in cupboards, boilers).

• Upgrades beyond a reasonable modern equivalent.

How the Relief Is Calculated

1. Start with the purchase price of the new item.

2. Add associated costs (delivery, installation, disposal).

3. Deduct any proceeds received from selling or part-exchanging the old item.

4. If the new item is an upgrade, restrict the claim to the cost of a reasonable replacement.

Example: An old sofa sold for £50. A new sofa costs £500, with £30 delivery. Relief = £480.

Common Pitfalls Landlords Face

• Treating capital improvements as deductible expenses.

• Forgetting to deduct resale proceeds from the claim.

• Claiming for fixtures or first-time furnishings.

• Failing to keep records of old items and disposal.

These errors can result in HMRC queries and disallowed claims.

How Wexley Protects Landlords

At Wexley & Associates, we ensure landlords:

• Correctly distinguish between allowable and non-allowable costs.

• Maximise Replacement of Domestic Items Relief while staying HMRC-compliant.

• Maintain audit-proof documentation for all expense claims.

• Optimise expense timing to reduce tax liability.

With expert guidance, landlords claim confidently and avoid costly mistakes.

Claim Relief the Right Way

Maximising your expense claims requires clarity and compliance. With professional support, you can reduce your tax bill while staying fully aligned with HMRC’s rules.

Contact Wexley & Associates today to ensure your expenses and domestic items relief are claimed correctly.

References

• HMRC: Work out your rental income when you let property

• HMRC: Replacement of Domestic Items Relief — Property Income Manual

• Related Wex Insider article: Property & Landlords Tax Explained: The Complete 2025/26 Guide for UK Landlords