Understanding Tax Deductible Repairs and Renewals

Understanding what are tax deductible repairs and renewals is crucial. Because where an expense is considered an enhancement it's not allowed when incurred. 

Tax Deductible Repairs and Renewals

Is it an enhancement or renewal?

Any expense enhancing or changing an asset’s nature is regarded as capital. So it won't be regarded as tax deductible repairs and renewals. For example, replacing old plastic guttering with new copper guttering is an allowable revenue expense. 

Whilst the new gutter improves the property, it doesn’t change its function. However, adding a gutter to a building that never had one is capital expenditure. As a result, the new gutter adds a function, changing the asset's nature.

Repairs using modern techniques and materials nevertheless still count as repairs. Therefore you should assess each repair individually. What's more, new materials appear on the market daily. Moreover, any quotes and invoices should clearly explain what has been done. Furthermore, HMRC's internal guidance details how they determine whether expenditure is either an improvement or repair.

You should only claim the repair incurred as an expense. In other words, you cannot claim amounts recovered via insurance or tenants. For example via a Tenancy Deposit Scheme.

What about dilapidations?

In a let building, dilapidations fall to the landlord or tenant, depending on the lease terms. Dilapidations usually count as capital expenditure, not as repairs for wear and tear.

Furthermore, if a tenant pays the landlord for dilapidations, this offsets the landlord’s costs. As a result a landlord can't claim these costs against rental income. Additionally, if a tenant leaves without paying for dilapidations, the expense nevertheless remains capital and not tax deductible repairs and renewals. 

Wear and Tear vs Dilapidations

Normal wear and tear, such as periodic painting or replacing rotten windows, counts as repairs and is therefore tax deductible against income. What's more, if a tenant damages flooring, changes wiring unsafely, or removes a door without replacing it, the cost to fix these issues is treated as a dilapidation. 

Because it can't be claimed as a deduction against income it's important to agree a schedule of dilapidations with an outgoing tenant. 

New Assets and Pre-Trading Expenditure

Work done in order to make an asset usable in a business is regarded as capital unless the asset was usable in its acquired state. However, if the asset was purchased at a discount due to poor condition any major repairs after purchase would indicate expenditure is of a capital nature. Therefore, it would not be considered as tax deductible repairs and renewals.

An example

Tony buys a flat with a £12,000 discount due to a rotten fire escape and leaking roof. He spends £17,000 on repairs, redecorating, and replacing carpets and the kitchen sink. Tony treats £5,000 as a revenue expense for non-essential repairs at the time. This approach helps him manage tax deductible repairs and renewals effectively.

Repairs and integral features

Special rules apply to repairs to integral features. Replacement of an integral feature occurs when costs exceed 50% of the replacement cost within 12 months. Replacement expenditure isn't deductible against income but is eligible for capital allowances.

Property Letting and Tax Deductible Repairs and Renewals

For residential property letting businesses, the integral feature restriction doesn’t apply so they claim Replacement of Domestic Items instead.

Therefore expenditure on refurbishment between lettings is treated as capital, subject to the Replacement of Domestic Items Relief rules.


Understanding the difference between capital and revenue expenditure ensures you correctly claim tax deductible repairs and renewals. As a result  this knowledge will help optimise your tax treatment and navigate complex tax scenarios effectively.

For more useful information, check out our Ebooks here.

And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].

Alternatively, please feel free to complete our Business Questionnaire here.

Spread the word!

Why Friendly

We work with businesses and contractors/freelancers who want to embrace the world of online software and the benefits this brings. Using technology to help our clients is at the core of everything we do.

So if you'd like to find out more, just give a call or drop us an email - no hard sell.

Just friendly, professional advice!

Who we are

We're a small team with over 50 years experience of working with small businesses.

So we're in a unique position to understand the challenges that you face every day in your business.

And what's more, we're fully professionally qualified so you can be sure that your affairs are in safe hands.

Copyright 2016 by TFA Accountants Limited