Major repairs to a let property – What is deductible?

When carrying out major repairs on a let property, landlords must determine whether costs are revenue (deductible from rental profits) or capital (not immediately deductible).

• Revenue repairs: restore the property without significant enhancement (e.g. like-for-like roof replacement, fixing windows/doors, gutters, repainting). HMRC also accepts repairs using modern equivalents (e.g. wooden beams replaced with steel girders).

• Capital improvements: significant enhancements, use of superior materials, or alterations such as extensions. These are treated as capital expenditure.

Relief rules:

• Under both cash and accruals basis, revenue expenditure is deductible.

• Under accruals, capital costs are not deductible (relief may come via capital allowances or disposal).

• Under cash basis, most capital costs are deductible unless expressly prohibited (e.g. buildings, non-depreciating assets). Relief for improvements is instead given against capital gains on sale.