Date posted: 1st Oct 2025
The nature of buildings is such that it may be necessary to undertake significant repairs, such as the replacement of the roof, or even underpinning the property in the case of subsidence.
Where the property is a let property, the landlord will doubtless be keen to secure a tax deduction for the costs that they incur in the year of expenditure.
Capital or revenue
In determining whether a deduction can be made in calculating the rental profits, it is necessary to ascertain whether the repair is revenue (and deductible against rental income and save income tax) or capital (and deductible against the future sale and save capital gains tax). This will not always be clear cut.
Generally, a repair will be a revenue item if it restores the condition of the property. However, if the work undertaken significantly enhances the property, it will be classed as improvement expenditure rather than a repair and will be capital in nature. Expenditure on a like-for-like replacement of a roof will be revenue expenditure but a significantly enhanced roof will be capital expenditure.
Common repairs which HMRC accept as being revenue in nature include replacing roof slates, flashing and gutters, exterior decorating and painting, stone cleaning, mending broken windows, doors, furniture and appliances and repointing.
However, where the repair leads to an improvement, consideration must be given as to whether the improvement is significant enough for the expenditure to be capital rather than revenue. An improvement may simply arise because of improvements in the materials available or technological advances. HMRC usually accept this and agree that a repair is revenue rather than capital where the improvement arises solely as a result of the use of more modern materials. For example, the cost of replacing wooden beams with steel girders is accepted to be a revenue expense.
However, if superior materials are used which result in significant improvement, the cost is capital rather than revenue. Likewise, where there are significant alterations to a property, for example, extending the property rather than simply replacing a wall, the costs will be capital.
Help is here
It is important to speak to an experienced tax adviser, in relation to tax relief for such expenditure and as ever, we are here to help.
