Landlord Expenses in MTD: 15 Things You're Probably Unsure About

Landlord Expenses in MTD: 15 Things You're Probably Unsure About

Most landlords know the basics - mortgage interest, letting agent fees, repairs. But when you're actually sitting down to file your MTD quarterly update yourself, the easy examples run out fast. Can you claim the council tax you paid while a property was empty? What about the insurance renewal you paid in advance? Does fixing a broken boiler count as a repair or something bigger? This post works through 15 real expenses that landlords genuinely get stuck on, using a plain yes/no/sometimes framework so you can make the call yourself without guessing.

These aren't the obvious ones. These are the grey-zone questions that come up when you're doing it yourself and there's no accountant to ask.

How to Use This Guide

Each expense gets a verdict - Yes (generally allowable), No (generally not allowable), or Sometimes (it depends on the specific situation). After the verdict is the decision logic: the question you should ask yourself to work out which category your situation falls into.

These rules apply to residential property rental income reported under the property income category in MTD. They don't apply to furnished holiday lettings (which have different rules) or commercial property.

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The 15 Expenses

1. Council Tax - Sometimes

Council tax is normally the tenant's responsibility, not yours. If your tenant pays it, you can't claim it. But if you pay council tax yourself - for example, because the property is empty between tenancies, or because your tenancy agreement puts the responsibility on you - then yes, you can claim it as an allowable expense.

The question to ask: Who actually paid it, and was it in connection with the rental of the property?

2. Landlord Insurance - Yes

Buildings insurance, contents insurance, landlord liability insurance and rent guarantee insurance are all allowable expenses. These are costs you incur specifically because you're renting out property, so HMRC treats them as a legitimate business cost.

Watch out for: If you pay an annual premium in advance that crosses quarter boundaries, you still record it in the quarter you paid it. You don't need to split it across quarters in your MTD quarterly update - that level of accruals accounting isn't required.

3. Letting Agent Fees - Yes

Fees paid to a letting agent for finding tenants, collecting rent, or managing your property are fully allowable. This includes tenant-find fees, inventory fees, and ongoing management charges. These are straightforward running costs.

One exception: If an agent charges you a fee for something that improves or adds to the property - for example, overseeing a major refurbishment - that cost may be capital expenditure rather than a running expense. See point 11 below for more on this distinction.

4. Property Management Costs - Yes

Similar to agent fees, if you pay a property management company to handle maintenance calls, organise contractors, or manage inspections, those fees are allowable. This also covers things like the cost of software you use to manage your rental property administration.

5. Utilities You Pay as the Landlord - Sometimes

If your tenants pay their own gas, electricity and water, you can't claim those bills - you're not paying them. But if you pay utilities yourself (common in HMOs - Houses in Multiple Occupation - or properties let inclusive of bills), the amounts you pay are allowable expenses.

Also allowable: Utilities for communal areas in a block you own, or utility costs during a void period between tenancies.

The question to ask: Are you actually paying this bill, or is your tenant?

6. Repairs and Maintenance - Yes (with limits)

General repairs and maintenance are allowable. This covers fixing what already exists - replacing a broken window, repairing a leaking roof, repainting worn walls, fixing a faulty boiler. The key word is "restoring" - you're putting something back to how it was, not improving it.

This is one of the most common points of confusion for landlords filing themselves. The distinction between a repair and an improvement matters a lot. Read Landlord Repairs vs Capital Works: What MTD Allows for the full breakdown.

7. Replacing a Full Boiler - Sometimes

This is a common grey area. A like-for-like boiler replacement - same type, same capacity - is generally treated as a repair and is allowable. You're replacing something that failed with an equivalent item.

But if you take the opportunity to upgrade to a significantly more efficient system, or to add a boiler to a property that didn't previously have one, that starts to look like an improvement or addition - and that's capital expenditure, which isn't claimed in your quarterly updates.

The question to ask: Are you replacing like for like, or are you improving beyond what was there before?

8. Ground Rent and Service Charges - Sometimes

If you own a leasehold property and pay ground rent and service charges to a freeholder or management company, those costs are allowable as a landlord expense - provided they relate to the rental property. This is covered in more detail at Service Charges and Ground Rent: What Landlords Can Claim in MTD.

Watch out for: If part of the service charge covers capital improvements to the building (a major works levy, for instance), that portion may not be allowable as a revenue expense. If you've received a section 20 notice for major works, it's worth checking what the charge actually covers before claiming it.

9. Mortgage Interest - Yes (but only the interest)

You cannot claim your full mortgage payment as an expense. Only the interest portion is relevant - and even then, the tax treatment changed in 2020. You no longer deduct mortgage interest directly from your rental income as an expense. Instead, you receive a 20% tax credit at the end of the year.

In your MTD quarterly updates, you don't record mortgage interest as an expense in the same way as other costs. There's a separate field for finance costs. This is explained fully at Landlord Mortgage Interest in MTD: What You Can Claim.

10. Accountancy and Professional Fees - Yes

If you pay an accountant or tax adviser to help with your rental income - preparing accounts, advising on allowable expenses, or dealing with HMRC on your behalf - those fees are allowable. The cost of software you use to file your MTD quarterly updates (such as AffordableMTD) also counts as an allowable expense.

Not allowable: Legal fees for buying or selling property. Those are capital costs, not running expenses.

11. Legal Fees for Tenancy Disputes - Sometimes

Legal fees for routine tenancy matters - drawing up a tenancy agreement, chasing rent arrears, eviction proceedings - are generally allowable as revenue expenses.

But legal costs connected to buying or selling a property, or extending your lease as a leaseholder, are capital expenditure and are not allowable in your quarterly updates.

The question to ask: Does this legal cost relate to the ongoing management of your rental, or to acquiring or disposing of an asset?

12. Furniture and Appliances - Sometimes

You cannot claim the initial cost of furnishing a property as a straightforward expense. However, once you have furnished items in place, you can claim the replacement domestic items relief when you replace them like for like. This applies to things like beds, sofas, white goods, curtains and carpets.

The relief only applies to the replacement cost of an equivalent item. If you replace a basic washing machine with a significantly more expensive model, you can only claim the cost of an equivalent basic replacement.

You cannot claim: The original purchase cost when you first furnish a property, or improvements beyond like-for-like replacement.

13. Home Office Costs - Sometimes

If you manage your rental portfolio from home - taking calls, keeping records, dealing with paperwork - you may be able to claim a proportion of your home costs (broadband, heating, electricity). This is a mixed-use expense, and only the business-use proportion is allowable.

This is genuinely difficult to calculate precisely, and HMRC doesn't publish a specific simplified rate for landlords the way it does for self-employed sole traders. Keep your calculations reasonable and documented. See Mixed-Use Expenses and MTD: Claiming the Business Percentage for practical guidance on how to work out a defensible figure.

14. Travel to Your Rental Property - Sometimes

Travel costs to inspect a property, meet a contractor, or deal with a tenant issue can be allowable. But there are conditions. You need to be travelling for a genuine business purpose - not just driving past or checking in casually.

If you use your own car, you can claim using HMRC's approved mileage rates rather than actual fuel costs. Keep a record of the date, destination, purpose and mileage for every trip. If you don't keep records, you can't claim it. See Mileage Allowances for MTD: Claiming Simplified Rates in Q1 for the current approved rates.

Not allowable: The cost of buying a car, or commuting-type travel with no clear business purpose.

15. Void Period Costs - Yes

Costs you incur while a property is empty between tenancies are still allowable, provided the property is available to let and you're actively trying to find tenants. This includes council tax during the void period (see point 1), utility bills, insurance, and maintenance costs.

The question to ask: Is the property genuinely available to let, or has it been taken out of the rental market? If it's sitting empty while you're deciding what to do with it, the position becomes less clear.

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A Quick Reference Summary

• Council tax: Yes if you're paying it (void periods, bills-included lets)
• Landlord insurance: Yes
• Letting agent fees: Yes
• Property management: Yes
• Utilities you pay: Yes if you're the one paying them
• Repairs and maintenance: Yes - restoring, not improving
• Boiler replacement: Yes if like for like, no if it's an upgrade
• Ground rent and service charges: Yes for routine charges, check major works levies
• Mortgage interest: Via finance costs field only - not a standard expense
• Accountancy fees and MTD software: Yes
• Legal fees: Yes for tenancy management, no for property purchase/sale
• Furniture and appliances: Replacement only, like for like
• Home office costs: Business-use proportion only
• Travel: Yes with mileage records, clear business purpose
• Void period costs: Yes while actively letting

What to Do If You're Still Not Sure

A few practical rules of thumb when you're on the fence:

1. Ask whether it's a running cost or an improvement. Running costs are usually allowable. Improvements to the property usually aren't - they're capital expenditure.
2. Check who actually paid. You can only claim expenses you paid yourself. If the tenant paid it, it's not your expense to claim.
3. Keep the evidence either way. Whether you claim something or not, keep the receipt, invoice, or bank record. If HMRC asks questions later, you'll need to show your working. See What Proof HMRC Needs for MTD Expenses: A DIY Filer's Guide.
4. Don't overclaim, but don't underclaim either. Many landlords filing themselves leave money on the table by being overly cautious. If an expense is genuinely connected to your rental property, it's worth understanding whether it qualifies before dismissing it.

For more on grey-area decisions across all income types, Grey-Area MTD Expenses: 10 Things You're Probably Wondering About covers some additional scenarios that crop up regularly.

Recording Expenses in Your Quarterly Update

When you file your MTD quarterly update, you're categorising your expenses into HMRC's property expense categories. The categories matter - putting something in the wrong box can cause problems even if the overall total is correct. Common MTD Expense Miscategories: Spot and Fix Your Mistakes covers the most common categorisation errors and how to correct them.

Remember that your quarterly update is a running record - not a final tax calculation. The full picture, including reliefs and adjustments like mortgage interest tax credits, is pulled together at the final declaration at the end of the tax year.

Wrapping Up

Landlord expenses in MTD don't have to be a guessing game. Most of the grey-area decisions come down to a small number of consistent questions: are you the one paying? Is it a running cost or an improvement? Is there a clear connection to the rental of the property? Work through those questions for each expense, keep your evidence, and you'll have a defensible set of figures whether HMRC ever asks or not.

If you're setting up your records system to make this easier quarter by quarter, How to Set Up a Record-Keeping System for MTD Quarterly Updates is a good practical starting point.