Can landlords deduct mortgage interest from rental income?

No. Since the Section 24 restriction finished phasing in, finance costs give a 20% tax credit instead of a deduction. You cannot subtract mortgage interest when working out your taxable rental profit.

What is the difference between a repair and an improvement?

A repair restores something to its original condition and is fully deductible, like mending a leaking roof. An improvement makes the property better than it was, like a higher-spec kitchen, and is not deductible against rental income.

What can UK landlords claim as expenses?

The rules on what you can claim have not changed under Making Tax Digital — what changed is how you record it. Every allowable cost still reduces your rental profit, but you now log each transaction with a date, an amount and a category, and the category totals flow into your quarterly updates. The biggest trap is unchanged too: mortgage interest is no longer a full deduction.

Mortgage interest: a 20% tax credit, not a deduction

Since the Section 24 restriction finished phasing in, landlords cannot deduct mortgage interest when working out taxable rental profit. Instead you get a tax credit worth 20% of your finance costs. For a basic-rate taxpayer the result is similar. Higher and additional-rate landlords pay noticeably more, because the credit is capped at 20% whatever rate you pay.

Keep finance costs in their own category — they are reported separately from running expenses.
The same restriction covers interest on loans for furnishings or improvements.
Log them like everything else: date, amount, category.

What you can claim

Letting agent fees and management charges.
Landlord insurance — buildings, contents and rent guarantee cover.
Service charges and ground rent on leasehold flats.
Repairs and maintenance, from mending a roof tile to redecorating between tenancies.
Utilities and council tax you pay yourself, for example during voids.
Accountancy fees, advertising for tenants, and phone or broadband used for the business.
Replacing furniture and appliances — but not furnishing a property for the first time.

The old 10% wear and tear allowance was abolished in April 2016. Today you claim the actual cost of replacing a domestic item — a new sofa, fridge or bed — on a like-for-like basis.

Repairs vs improvements: the classic mistake

A repair restores something to its original condition and is deductible in full. An improvement makes something better than it was, and is not deductible against rental income.

Deductible: mending a leaking roof, fixing a broken boiler part, repainting scuffed walls.
Not deductible: building an extension, adding a conservatory, putting in a higher-spec kitchen.
Replacing a tired kitchen with a similar one is a repair. Upgrading to a premium one is an improvement.

Honest small print: if an old guide tells you to claim 10% wear and tear or full mortgage interest, it predates 2021 and will overstate your profit. Check the date on anything you read.

Recording it: SA105 categories, digital records

The categories in your digital records line up with the boxes on the SA105 property pages — rents received, property expenses and residential finance costs kept separate. Under MTD from April 2026, the same category totals go into each quarterly update, and the final declaration replaces the SA105 at the end of the year. A spreadsheet is fine for keeping the records; recognised software or a bridging tool is what submits them to HMRC.

Log every property expense in the right category, and your quarterly totals are already done.

Landlord MTD Tracker — £12