If you let out property, you’ll spend money on it from time to time. A boiler fails, the kitchen needs replacing or you decide to add an extension. For tax, it matters a great deal how that spending is classified.
Broadly, repairs and maintenance are revenue costs, which you can usually deduct from your rental income. Improvements are capital costs, which you usually can’t deduct from your rental profits but may be able to take into account when you sell. Here’s how to think about the difference.
Update, October 2026: the special tax rules for furnished holiday lettings ended from April 2025 (6 April for Income Tax and Capital Gains Tax, 1 April for Corporation Tax). Former holiday lets are now taxed like other residential lettings, so the relief for replacing domestic items described below can now apply to them (HMRC Property Income Manual). The rules on repairs and improvements haven’t changed.
Key points
- Repairs and maintenance that keep a property in the condition it was in are usually revenue costs.
- Improvements that make the property better than it was are usually capital costs.
- Replacing something with a modern equivalent is generally still a repair.
- Capital costs may be taken into account for Capital Gains Tax when you sell.
- Keep invoices and photos, and describe the work clearly in your records.
On this page
Revenue and capital: the basic idea
When you work out your rental profit, you can usually deduct costs that are wholly and exclusively for the letting. Repairs and maintenance fall into this group. Capital spending, such as buying the property, extending it or improving it, generally doesn’t. GOV.UK explains how to work out your rental income and which costs you can claim.
The question to ask is: does the work restore the property to the condition it was in, or does it make it better? Restoring is usually a repair. Making it better is usually an improvement.
Some simple examples
- Repainting and redecorating between tenants is usually a repair.
- Fixing a leaking roof or replacing broken tiles is usually a repair.
- Replacing a worn kitchen with a similar standard of kitchen is usually a repair, even if the new units are more modern.
- Replacing single glazing with double glazing is now generally treated as a repair, because double glazing is the modern equivalent.
- Adding an extension, a loft conversion or an extra bathroom is an improvement.
- Replacing a basic kitchen with a much higher-specification one may be treated as an improvement. If the improvement is significant, HMRC’s guidance is that the whole cost can be capital.
HMRC’s own guidance in its Property Income Manual explains the distinction, with more examples. The detail can be finely balanced, so if a large project is planned, it’s worth asking before you start.
Watch out for mixed projects
Many projects include both repairs and improvements. For example, you might replace a tired bathroom like for like, and at the same time add a second bathroom. Ask your builder to split their quote and invoice so it’s clear which work is which. That makes it much easier to treat each part correctly.
Work carried out on a property you’ve just bought can also need care. If the property couldn’t be let until the work was done, the cost may be capital, even if it looks like a repair.
Replacing furniture, appliances and other items
If you let a residential property, furnished or unfurnished, you may be able to claim the cost of replacing furniture, furnishings, appliances and kitchenware, such as beds, carpets or fridges, when they wear out. The relief is for replacing items, not for buying them for the first time. It doesn’t apply to furnished holiday lettings or to income under the Rent a Room Scheme. The GOV.UK guidance on rental income explains which items qualify.
Capital costs when you sell
Capital spending you can’t deduct from rental profits may still count when you sell the property. Improvements that are reflected in the property when you sell it can usually be taken into account in working out your Capital Gains Tax. That can be many years later, so good records are essential.
Keep good records
- keep every invoice, and ask for a clear description of the work done;
- take photos before and after larger jobs;
- note why the work was needed, for example damage, wear or a tenant’s complaint;
- keep improvement records for as long as you own the property, and for some time after you sell.
Sources
Our main sources are HMRC and GOV.UK:
- Income Tax when you rent out a property: working out your rental income
- HMRC Property Income Manual: PIM2030, deductions: repairs: is it capital?
Talk to us about your rental property
If you’re planning work on a rental property, we can help you work out how the costs are likely to be treated before you start, and keep the records you’ll need later. Call us on 020 7164 0225, send us a WhatsApp message or email your tax question to hello@ibandco.co.uk.
You can also read about our services for property owners.
First published 8 October 2024. Tax content checked on 9 October 2026. This article reflects the rules at the date it was first published. Where something has changed since, we’ve added an update note. Rules and rates change, so please check with us before acting.
Please note: this article is general information based on our understanding of UK tax rules at the date shown above. It is not advice for your circumstances, and tax rules and rates can change. Please speak to us before acting on it.
