Is home improvements and renovations
tax deductible?

No, not as a running cost. Improvements and renovations that go beyond repairing, such as an extension, a loft conversion or a better kitchen than before, are capital, and not deductible from rental or trading income (GOV.UK). Like-for-like repairs are allowable, and capital improvements to a let property can reduce Capital Gains Tax when you sell (GOV.UK).

Renovating a property is where landlords most often lose relief they thought they had, and where some claim relief they should not. The line is between restoring and improving. Fixing what was there is a repair. Adding something new, or making it significantly better, is an improvement, which is capital: no deduction now, but it can reduce the gain when you sell.

Is home improvements and renovations tax deductible?

The HMRC rule

The cost of buying property, and improvements or enhancements to it, are capital. They are not deducted from rental or trading income, though many count towards the cost for Capital Gains Tax. The rule comes from Work out your rental income when you let property, Office, property and equipment.

GOV.UK says landlords cannot deduct enhancements or improvements to the property, which are capital expenditure, but can claim maintenance and repairs, and that replacing a part with the nearest modern equivalent is still a repair if the improvement is incidental, such as double glazing replacing single glazing (landlords). The SA105 notes say not to include the cost of buying, selling, improving or altering property (SA105 notes). HMRC's property manual explains the difference between repairs and improvements (PIM2020).

When you can claim it

• Like-for-like repairs and replacements with a modern equivalent.
• Redecoration between tenants to restore the property.
• Replacing a kitchen or bathroom with one of similar standard.
• Capital improvements added to the property’s cost for Capital Gains Tax.

When you cannot

• Extensions, loft conversions and new rooms.
• Upgrading to a much higher specification than before.
• Adding things that were not there, such as a conservatory or central heating.
• Improvements to your own home.

What to claim instead

Keep invoices for all improvement work with the property's records. When you sell a let property, capital improvements that are still reflected in the property at the time of sale reduce the chargeable gain. For a home, improvements are covered by private residence relief anyway.

How to decide if you can claim it

1. Was it for the business? A cost is only allowable if you incur it wholly and exclusively for the business. If it also serves a personal purpose that cannot be separated, such as clothing that keeps you warm or a meal that keeps you going, HMRC disallows it.
2. Is part of it personal? Where a cost has a business part you can identify, such as the business calls on a phone bill or the business miles in a car, you claim that part and leave the rest out, on a reasonable basis you can explain.
3. Is it a running cost or something you keep? It is something you buy to keep. On traditional accounting that means capital allowances, where the item qualifies, rather than an expense. On the cash basis most equipment is an ordinary expense, but cars, land and buildings never are.
4. Is there a specific rule? For home improvements and renovations, the deciding rule is buying and improving property: the cost of buying property, and improvements or enhancements to it, are capital. They are not deducted from rental or trading income, though many count towards the cost for Capital Gains Tax.

Worked example: a landlord’s refurbishment

Between tenants, a landlord spends £2,000 repainting and replacing carpets like for like, £6,500 replacing a worn kitchen with one of similar standard, and £18,000 on a rear extension. The £2,000 and £6,500 are repairs, allowable against rent (the carpets as replacement domestic items). The £18,000 extension is capital, added to the property's cost for Capital Gains Tax.

Repair or improvement

A repair restores the property to its previous condition, even using modern materials. An improvement adds something new or significantly better. Replacing a broken boiler is a repair; installing central heating where there was none is an improvement. Replacing an old kitchen with a similar standard one is a repair; replacing a basic kitchen with a luxury one is partly an improvement.

Newly bought properties

Repairs to a property you have just bought are generally allowable, provided it was usable as a rental when you bought it. If the property could not be let without the work, and the price was reduced because of its condition, the work is capital. The Odeon and Law Shipping cases set out this distinction.

Kitchens and bathrooms

Replacing a kitchen or bathroom like for like, even with modern units, is usually a repair. Reconfiguring the space, adding extra fittings or significantly upgrading the specification can make part of the cost capital. If a replacement is partly an improvement, apportion the cost.

Energy efficiency

Replacing single glazing with double glazing is a repair, as GOV.UK's example shows. Adding insulation, solar panels or a heat pump where there was nothing before is generally an improvement. Replacing a failed gas boiler with a heat pump is less clear, and may be treated as a replacement with a modern equivalent in some cases.

Sole traders and home improvements

For a sole trader working from home, improvements to the home are personal and capital. Repairs to a room used only for business can be allowable. On the cash basis, spending on the building itself, such as walls, floors, doors and windows, is not deductible when it is capital.

Capital Gains Tax

When you sell a let property, you deduct the purchase price, buying and selling costs, and capital improvement costs from the sale price. The improvement must still be reflected in the property when you sell. Keep invoices for the whole time you own the property.

Where it goes

Repairs go in property repairs and maintenance, box 25 of the UK property pages. Improvements go nowhere on the property pages; they are part of the Capital Gains Tax computation when you sell.

If you are a landlord

Landlords can deduct repairs but not improvements, which are capital (GOV.UK). Capital improvements are relieved when you sell, as part of the property's cost for Capital Gains Tax.

Where it goes on your return and in MTD

Because it is not allowable, a sole trader leaves it out of expenses altogether. If it went through your business account, record it as drawings or a non-business payment, and if your accounts include it, add the same amount back in the disallowable column of the full self-employment pages.

For a landlord, it belongs in property repairs and maintenance (SA105 box 25 on the UK property pages), and in the matching category of a Making Tax Digital property update.

If your turnover was under £90,000, you can use the short self-employment pages (SA103S), which ask for a single figure for total allowable expenses rather than a box-by-box breakdown, and the full pages let you give just a total in box 31 too. The category still matters for your own records and for Making Tax Digital, where each quarterly update uses the same categories unless you choose to send one consolidated figure.

Most sole traders now use the cash basis, the default from the 2024/25 tax year, which counts a cost when you pay it. On traditional accounting you count it when you incur it, and equipment you keep goes through capital allowances rather than expenses.

How much an allowable cost saves

The value of a deduction is the tax it removes from your profit, not the cost itself. At the basic rate a sole trader saves 26p for every pound of allowable expense, at the higher rate 42p, and in the personal allowance taper between £100,000 and £125,140 as much as 62p. Landlords pay no Class 4 on rental profit, so they save 20p or 40p.

What £1,000 of allowable expense saves a sole trader in 2026/27

• Basic rate (20% + 6%)£260
• Higher rate (40% + 2%)£420
• Additional rate (45% + 2%)£470
• Allowance taper band (60% + 2%)£620

Records to keep

Keep invoices that describe the work or service, the tenancy agreement, agent statements and, for major work, before and after photos. Keep capital costs with the property’s purchase records, because they reduce any capital gain when you sell. Records must be kept for at least five years after the 31 January deadline for the tax year.

From 6 April 2026, sole traders and landlords with qualifying income over £50,000 keep these records digitally and send quarterly updates under Making Tax Digital, falling to £30,000 from April 2027 and £20,000 from April 2028. The MTD requirement checker shows when it applies to you.

Common mistakes

• Deducting an extension or loft conversion from rent.
• Claiming a luxury upgrade in full as a repair.
• Losing improvement invoices needed years later for Capital Gains Tax.

Related expenses

This item sits in the repairs and maintenance of property and equipment category. The A to Z of expenses answers the same question for every other cost.

TapTax sorts each cost into the right category as you record it, applies the business share where you set one, and keeps the receipts with the figures, ready for your quarterly updates and final return.