Understanding Tax Deductible Repairs and Renewals

It is important to be able to distinguish between tax-deductible repairs and renewals. But what is the difference between them?

Enhancements vs. Renewals:

Any changes or enhancements made to an asset are considered capital, meaning they are not tax-deductible repairs or renewals. Allowable revenue expenses are improvements to a property without changing its function, e.g. replacing an old wooden door with a new steel one. However, if a new steel door were added to a property that never had one, this would be capital expenditure. The door adds a new function to the asset which changes the asset’s nature.

Repairs that use modern materials or techniques still count as repairs. So each repair should be assessed individually, with quotes and invoices to explain the work. If you are still confused about expenditures, HMRC guidance will help determine whether it is a repair or a renewal. 

Dilapidations vs. Wear and Tear

Tax deductible repairs would be granted to normal wear and tear, e.g., painting and replacing windows. Any damage caused by a tenant, e.g. missing doors or broken flooring, would be considered dilapidation. 

New Assets and Pre-Trading Expenditure

Any work done to make an asset usable in business is considered capital. Major works on an asset may mean it is sold at a discounted price, this would be considered expenditure of a capital nature. For example:

A cottage is bought with a £15,000 discount due to a cracked foundation and broken windows. £20,000 is spent on repairs, repainting, installing new windows, and replacing the bathroom fixtures. £6,000 is put down as revenue expenses for non-essential repair. This approach helps to manage tax-deductible repairs and renewals effectively.

A capital expenditure will bring value to a property. Improvement & refurbishment expenditures will reduce the capital gains tax when the property is sold/disposed of.  

Repairs are to maintain a property, these expenses are claimed as a revenue expense in accounts and will reduce income tax.

It is important to keep good records and distinguish between capital and revenue expenses to easily establish what you can claim. 

Contact your account manager if you have any questions or queries about this topic.

BIM46901 – Specific deductions: repairs and renewals: overview – HMRC internal manual – GOV.UK (www.gov.uk)

News Categories

Most Recent Articles

Let Property Campaign: Explaining Unprompted Disclosures

Let Property Campaign: Explaining Unprompted Disclosures

Received a letter from HMRC about unpaid rental income? Acting now could save you money. Learn why an unprompted disclosure is the best option for landlords. Recently a number of our clients have received letters from HMRC about unpaid tax on their rental income. Many...

Planning for the Upcoming Pension Tax Changes

Planning for the Upcoming Pension Tax Changes

Major pension tax changes are coming in April 2027, affecting how pension pots are inherited and taxed. Learn how to plan ahead with smart tax strategies, from pension withdrawals to tax-efficient investments, so you can protect more of your money for the future. As...

What Vehicle Expenses can you actually Claim?

What Vehicle Expenses can you actually Claim?

Confused about vehicle expenses? Learn about the two methods for claiming vehicle costs and understand which expenses you can and cannot claim on.    During the busy period, we noticed some confusion among clients about what can and cannot be claimed when...

Do You Need to Fill Out a Tax Return When Working Overseas?

Do You Need to Fill Out a Tax Return When Working Overseas?

Avoid unexpected tax bills when working overseas. While you may not need to file a UK tax return, failing to inform HMRC of your status could lead to serious financial consequences. Discover the risks and penalties, and why a proactive approach could potentially save...

Essential Tax Savings for Close Protection (CP) Operatives

Essential Tax Savings for Close Protection (CP) Operatives

Discover essential tax savings for close protection operatives, including what expenses you can claim to maximise your earnings.  Close protection operatives often contact us with questions about allowable expense claims, as tailored guidance for their unique...

Archives