The short answer
UK landlords need records of all rent received and all property expenses. HMRC only allows costs incurred "wholly and exclusively" for the letting: repairs count, capital improvements don't, and relief on residential mortgage interest and other finance costs is restricted to the basic rate. Records must be kept for at least five years after the 31 January filing deadline.
Key facts
- Expenses must be wholly and exclusively for the purposes of renting out the property to be deducted from rental income. HMRC
- Repairs that restore something to its original condition, including like-for-like replacements, are allowable; capital improvements such as extensions are not. HMRC
- Relief for residential finance costs, such as mortgage interest, is restricted to the basic rate of Income Tax (20%). You cannot claim the capital part of a mortgage payment. HMRC
- In 2024 to 2025, repairs and maintenance (66.2% of unincorporated landlords) and rent, rates and insurance (66.1%) were the most commonly declared expenses. HMRC statistics
- Residential finance costs were the largest expense by amount, at £12.82 billion in 2024 to 2025. HMRC statistics
- A person letting property must keep records until the fifth anniversary of the 31 January after the tax year, with a penalty of up to £3,000 for failing to do so. Taxes Management Act 1970, section 12B
- Making Tax Digital for Income Tax applies to landlords and sole traders with qualifying income over £50,000 from 6 April 2026, over £30,000 from 6 April 2027 and over £20,000 from 6 April 2028. HMRC
Start with a simple view of money in and money out
If your rental income looks healthy but the property does not seem to produce much cash, begin by recording every payment against the property in a consistent format. The aim is not to make a tax judgement from a spreadsheet; it is to see what the property costs to run, what it brings in, and which costs need attention.
For each property, capture:
- rent received and the period it relates to;
- recurring running costs, such as management, insurance, routine maintenance and services you pay for;
- one-off repair and replacement work;
- improvement projects that change, upgrade or extend the property;
- finance payments, recorded separately from property running costs;
- the date, supplier, amount, payment status and supporting document for each entry.
Keeping these groups separate prevents a costly project or a finance payment from being mistaken for day-to-day property performance. It also gives you a more useful basis for comparing one month, tenancy or property with another.
Why cost visibility matters for landlords
Costs can rise without one obvious large bill. A handful of smaller charges—call-outs, contractor invoices, renewals and letting-related fees—can gradually reduce the cash left after rent is received. Without records that tie each cost to a property and date, it is difficult to tell whether a shortfall is temporary, seasonal or becoming routine.
A useful monthly review asks four practical questions:
- How much rent was actually received?
- What did it cost to operate the property this month?
- Were there exceptional repairs, void-related costs or projects that should be viewed separately?
- What documents support each figure?
This is a management view of the property, not tax, legal, financial or investment advice. Treatment of costs for a tax return can depend on the nature of the expense and your circumstances, so check current official guidance or seek qualified professional help where needed.
Separate recurring costs, repairs, improvements and finance
Using clear categories makes the totals more meaningful.
Recurring running costs
These are predictable or repeatable costs associated with holding and operating a rental property. Set up categories that reflect how you manage the property, rather than relying on one catch-all “expenses” line. For example, you may want separate records for insurance, management, safety-related work, cleaning, utilities paid by the landlord and routine maintenance.
The benefit is visibility: you can see whether a particular category is rising and whether it is specific to one property.
Repairs and maintenance
Record the description of the work alongside the cost. “Plumber” is less useful than “repair leak under kitchen sink”, especially when reviewing repeated issues later.
HMRC's property rental income statistics, published on 28 August 2026, show that repairs and maintenance were one of the two most common expense categories in 2024 to 2025. About 1.92 million unincorporated landlords (66.2%) declared £6.41 billion of repairs and maintenance, roughly £3,340 each on average. Rent, rates and insurance were declared by 66.1%.
Those figures are useful context, but they are not a benchmark for what any individual property should cost. They cover only expenses declared on tax returns, which excludes capital improvements, and they do not include landlords who let through a company.
Improvements and major projects
Keep substantial upgrades and projects in their own group, with the quotation, invoice, scope of work and completion date attached where possible. That distinction helps you avoid treating a major project as normal monthly running expenditure when assessing the property’s underlying performance.
It matters for tax too. HMRC's guidance says a repair that restores something to its original condition is allowable, including a like-for-like replacement with a modern equivalent, such as double glazing replacing single glazing. A capital improvement, such as an extension or an upgrade to a higher specification, cannot be deducted from rental income. Record the scope of the work clearly enough to show which it was.
It also creates a clearer project history for future planning, contractor discussions or a later sale decision.
Finance costs
Finance is often material to the cash position of a mortgaged property, so it is worth recording separately from repairs and other operating costs. HMRC's statistics show residential finance costs were the largest declared expense by amount in 2024 to 2025, at £12.82 billion, claimed by 39.8% of unincorporated landlords.
That does not mean finance costs should be combined with repair costs for every management decision. Keeping them distinct lets you review both:
- the property’s operating costs before finance; and
- the actual cash leaving your account, including finance payments.
For individual landlords, HMRC's guidance says relief on residential finance costs, such as mortgage interest, loan interest and associated fees, is restricted to a basic rate tax reduction of 20%, rather than being deducted from rental income. Only the interest is relevant: the capital part of a mortgage repayment is not an expense. Your own position may differ, so check the current guidance or take professional advice.
Build a record-keeping routine you can maintain
The best system is usually the one you will update promptly. Try this workflow:
- Record income when it arrives. Note the property, rental period and amount received.
- Add costs as invoices or receipts arrive. Do not wait until the end of the year, when descriptions and documents may be harder to find.
- Assign a plain-English category. Use the same categories each time so reports remain comparable.
- Attach the evidence. Store invoices, receipts, quotations, statements and correspondence with the relevant transaction.
- Flag unusual items. Mark major projects, void costs and one-off emergencies so they do not distort an ordinary-month comparison.
- Review monthly and quarterly. Look for unpaid rent, missing documents, repeated repairs and categories that have changed materially.
How long to keep records
The Taxes Management Act 1970 requires a person letting property to keep records until the fifth anniversary of the 31 January after the tax year. For the 2025 to 2026 tax year, with an online return due by 31 January 2027, that means keeping records until at least 31 January 2032. Failing to keep records can lead to a penalty of up to £3,000.
If your qualifying income from property and self-employment is above the Making Tax Digital for Income Tax thresholds, you will also need to keep digital records and send quarterly updates to HMRC. The thresholds are over £50,000 from 6 April 2026, over £30,000 from 6 April 2027 and over £20,000 from 6 April 2028.
A property-management system can make this routine easier by bringing costs, documents and reporting into one place. You can see how Portfoliq works or explore Portfoliq's landlord features to assess whether its tools suit the way you organise your property records.
Use two views of profitability
One total rarely answers every question. Consider maintaining two straightforward views.
Operating view
Compare rent received with routine running costs and ordinary maintenance. This can help you understand the ongoing cost of operating the tenancy and identify trends that need investigation.
Cash-flow view
Compare money received with all money paid out, including finance payments and exceptional projects. This shows the actual movement of cash, but can be more volatile because large works may fall in a single month.
Reviewing both views side by side stops a major improvement project from obscuring the recurring costs of the property, while still acknowledging its effect on cash.
A practical monthly checklist
Before closing each month, check that you can answer the following:
- Has all rent received been recorded against the right property and period?
- Is every payment assigned to a consistent category?
- Are repairs described clearly enough to spot recurring problems?
- Have significant upgrades and projects been kept separate from routine costs?
- Are finance payments visible but distinct from operating costs?
- Is there a document or note supporting each material entry?
- Has anything unusual been flagged for review next month?
Good records will not remove costs, but they make the causes of pressure easier to identify. For a small landlord portfolio, that clarity is often the first step towards more confident maintenance planning, budgeting and property-by-property review.