When you are making a historical disclosure via the Let Property Campaign, you aren’t just telling HMRC about the rent you received; you are also claiming the deductions you were entitled to over those years. Rental Tax relief.
At Felix Accountants, our expertise lies in identifying every possible “allowable expense” to ensure you only pay tax on your actual profit, not your gross turnover. In a 2026 disclosure, navigating the complex rules of Section 24 mortgage interest and the “Repair vs. Improvement” debate is where thousands of pounds can be saved.
1. The Section 24 “Mortgage Interest” Trap
Since 2020, the way landlords claim mortgage relief has changed fundamentally. You can no longer deduct mortgage interest from your rental income to reduce your taxable profit. Instead, you receive a 20% Tax Credit.
How it works in your disclosure:
If you are disclosing for years after 2020:
-
We calculate your tax on your full rental income (minus maintenance and fees).
-
We then take 20% of your mortgage interest and subtract that figure from your total tax bill.
The Impact: If you are a higher-rate (40%) taxpayer, you are effectively “losing” 20% of the relief you used to get. However, for many “accidental landlords” who remain in the basic rate band, the 20% credit still covers the full interest cost.
2. Maintenance: Is it a “Repair” or an “Improvement”?
This is the most contested area in any HMRC disclosure.
-
Repairs (Revenue Expenses): These are deductible from your rental income now.
-
Improvements (Capital Expenses): These cannot be used in your LPC disclosure. Instead, they are saved to reduce your Capital Gains Tax when you sell the property.
| Item | Classification | Tax Treatment |
| Fixing a broken boiler | Repair | Deduct from Rent (LPC) |
| Repainting between tenants | Repair | Deduct from Rent (LPC) |
| Replacing broken windows | Repair | Deduct from Rent (LPC) |
| Building an Extension | Improvement | Deduct from Sale (CGT) |
| Installing a New Conservatory | Improvement | Deduct from Sale (CGT) |
| Upgrading a Kitchen | Improvement* | Deduct from Sale (CGT) |
*Note: If you replace an old kitchen with a “like-for-like” modern equivalent, it is often treated as a repair. If you upgrade from laminate to granite or add more cupboards, it becomes an improvement.
3. The “Wholly and Exclusively” Rule
To be deductible in your disclosure, an expense must be incurred “wholly and exclusively” for the purposes of the property business.
-
Allowable: Letting agent fees, landlord insurance, Gas Safety certificates, and accountancy fees for the disclosure itself.
-
Partial: If you use your car to visit the property, we can claim 45p per mile for those specific journeys.
-
Not Allowable: Your personal phone bill (unless you have a dedicated “landlord” line) or clothing bought for DIY work.
4. Replacement of Domestic Items Relief (RDIR)
In your disclosure, we can claim for the cost of replacing furnishings and appliances provided for the tenant’s use. This includes:
-
Movable furniture (beds, sofas).
-
Household appliances (fridges, washing machines).
-
Floor coverings and curtains.
Crucial Rule: You can only claim the cost of the replacement, not the initial purchase of the first item you put in the house.
5. Maximizing Your “Pre-Letting” Expenses
Many landlords spend thousands fixing up a property before the first tenant moves in.
-
If the work was to fix “wear and tear” from the previous owner so it was in a fit state to rent, these are often Capital (Improvement) costs.
-
However, if the work was “revenue” in nature (decorating, minor repairs), we can often claim these as “Pre-trading expenses” provided they were incurred within 7 years of the rental start date.
6. How Felix Accountants Adds Value
In an LPC disclosure, every £1,000 of expenses we find could save you up to £400 in tax and £100 in penalties.
-
Historical Record Reconstruction: We help you dig through old bank statements to find forgotten costs.
-
Aggressive (but Legal) Deduction: We ensure you claim the maximum mileage and home-office allowances.
-
Interest & Penalty Mitigation: By lowering the “tax gap” through expenses, the interest and penalties automatically decrease.
Frequently Asked Questions (FAQs)
Q1: I don’t have receipts from 4 years ago. Can I still claim?
Yes. HMRC accepts “Reasonable Estimates” if you can show a bank transfer or a clear need for the work (e.g., a plumber’s visit showing on a statement without the invoice).
Q2: Can I claim my own time if I did the DIY work myself?
No. You can only claim for the cost of materials. You cannot “charge” your own business for your labor.
Q3: Are letting agent fees deductible?
Absolutely. 100% of management fees, finders’ fees, and inventory costs are deductible from your rental income before tax is calculated.
Q4: What about the “Property Allowance”?
You have a £1,000 tax-free property allowance. If your total expenses are less than £1,000, it is usually better to just claim this “flat rate” rather than counting individual receipts.
Q5: Can I deduct my mortgage capital repayments?
No. Only the interest element of your mortgage payment qualifies for the 20% tax credit. The part of your payment that pays off the loan itself is not a tax-deductible expense.
Lower Your Disclosure Bill Today
Don’t pay more than you legally owe. A specialist review of your expenses is the most effective way to reduce the cost of your Let Property Campaign settlement.