You own a rental property.
Every year, you pay landlord insurance.
If it’s a leasehold flat, you might also receive service-charge demands from the managing agent or freeholder.
So can you simply deduct those costs from your rental income when calculating your taxable rental profit?
Often, yes — but as always, we need to understand what you’ve actually paid for.
Can landlords claim insurance?
Let’s start with the straightforward one.
HMRC allows landlords to deduct qualifying insurance costs incurred for the purposes of their property business.
That can include insurance covering:
- damage to the property;
- contents belonging to the landlord; and
- loss of rental income.
So if you’re paying for normal landlord buildings or contents insurance relating to a property you let commercially, the premium will generally be an allowable expense of the property business.
HMRC specifically includes buildings and contents insurance in its examples of allowable expenses for residential landlords.
What if the property is temporarily empty?
This is where landlords sometimes hesitate.
Perhaps one tenant has moved out and you’re waiting for the next tenant.
You’re still paying the landlord insurance, but you’re not currently receiving rent.
Does that automatically stop the insurance being allowable?
Not necessarily.
HMRC’s Property Income Manual specifically confirms that allowable insurance premiums can include insurance for properties held for letting but temporarily vacant, as well as properties that are currently let.
The important point is that the property is still being held for the purposes of the rental business.
HMRC’s detailed guidance on insurance premiums is here:
What about Service charges?
If you own a leasehold rental property, you may pay a service charge towards the costs of maintaining or managing the building.
HMRC includes service charges among the expenses landlords may be able to deduct when calculating their taxable rental profit.
So an ordinary service charge relating to the running and maintenance of your rental property can potentially be an allowable expense.
But this is where I would slow down before simply taking the total figure from the annual statement and putting it into the tax return.
What are you actually paying for?
The name of an expense doesn’t determine its tax treatment.
We’ve seen this with repairs.
We’ve seen it with professional fees.
And the same principle matters here.
If your service-charge statement includes different types of expenditure, you need to understand what those amounts actually relate to.
Normal recurring costs associated with maintaining and running the building are very different from expenditure that is capital in nature.
So don’t simply think:
“It says service charge, therefore the whole amount must be deductible.”
Look at what you’re actually being charged for.
This is the same principle I discussed in Landlord Expenses: Just Because You Paid for It Doesn’t Mean It’s Tax Deductible — the fact that you’ve paid a cost doesn’t necessarily tell you how it should be treated for tax..
And where part of a service charge relates to substantial work on the property, the distinction between a repair and an improvement can also become important. I explain that distinction in Repairs vs Improvements: What’s the Difference for Landlord Tax?
What about Ground rent?
HMRC also lists ground rent as an expense that can be deducted when calculating rental profit, provided it relates to the property business.
Again, we’re talking about the normal recurring ground rent payable in connection with the rental property.
A separate capital payment to acquire, extend or alter an interest in a property is not automatically treated in the same way simply because it involves a freeholder or lease.
What if the tenant reimburses you?
This is another area where you need to look at the whole transaction.
Perhaps you pay a cost relating to the property and then recover that amount from your tenant.
Don’t look only at the expense leaving your bank account.
You also need to consider amounts you’ve received in connection with the property business.
Rental profit is calculated by looking at the relevant property-business income and the expenses properly deductible against it.
What if you own more than one rental property?
For an individual with several ordinary UK rental properties, those properties will generally form part of the same UK property business.
So you’re not normally calculating an entirely separate property business for every house or flat.
You bring together the income and allowable expenses of that property business to establish the overall rental profit or loss.
That is also why an expense relating to one property can still matter even if that particular property had little or no rental income during part of the year.
Keep the supporting documents
For insurance, keep the policy schedule and evidence of the premium you’ve paid.
For service charges, keep the demands and annual statements rather than recording only the amount leaving your bank account.
Those documents can help establish what the payment was actually for.
And if you’re reconstructing several years of historic rental income, this can become particularly important.
A bank statement might tell you that £1,800 went to a managing agent or freeholder.
It doesn’t necessarily tell you what was included within that £1,800.
Related video: Insurance and service charges are only two of the costs landlords may need to consider. In this video, I look at seven landlord expenses that aren’t always treated for tax in the way you might expect.
Three questions to ask
If you’re deciding whether an insurance or service-charge cost can be claimed against your rental income, start with three questions:
1. Does the expense relate to my property business?
2. What did I actually pay for?
3. Is it an ordinary Revenue expense, or does the payment relate to something Capital in nature?
Those questions are far more useful than simply looking at the description on your bank statement.
The important distinction
Landlord insurance and ordinary service charges are common rental-property expenses and can often be deductible.
But the principle we’ve been returning to throughout this series still applies:
Paying an expense doesn’t automatically make it tax deductible.
You need to understand the nature and purpose of the cost.
And where you’re dealing with historic rental income, don’t discard an expense simply because you aren’t sure how it should be treated.
Establish what it was first.
Need help with your rental-property tax position?
If you’re a UK landlord and you’re unsure which expenses you can claim, or you have rental income from earlier years that hasn’t been reported to HMRC, you can book a Paid Tax & Property Consultation with Grace Certified Accountants.
We’ll look at your circumstances and help you understand the appropriate next steps.