Before you work out how much you can claim in capital allowances, work out whether you can claim at all. For landlords, that answer turns almost entirely on what type of property you let and where the plant sits inside it. A commercial unit and a standard buy-to-let flat are taxed very differently here, and the most expensive mistake is assuming a residential portfolio carries the same claim base as an office or a shop.
One question sits upstream of capital allowances entirely: is the spend even capital, or is it a revenue repair you deduct in full this year? Our guide to capital versus revenue expenditure for landlords draws that line. If the cost is genuinely capital, eligibility is the next question, and that turns on the property type.
Can landlords claim capital allowances? The short answer by property type
Capital allowances are not a reward for owning a building. They are available where the property is held for a qualifying activity, and a UK property business is one (CAA 2001 s.15(1)(b)). The catch for landlords is CAA 2001 s.35: expenditure on plant or machinery for use in a dwelling-house within a property business is not qualifying expenditure. That single rule is why capital allowances on investment property in the UK behave so differently between residential and commercial stock.
So rental capital allowances exist, but the dwelling-house bar gates them. Here is the quick verdict by property type.
| Property type | Can you claim plant and machinery allowances? | Statutory reason | What to claim or use instead |
|---|---|---|---|
| Standard residential buy-to-let (inside the dwelling) | No | CAA 2001 s.35 dwelling-house bar | Replacement of domestic items relief and revenue repairs |
| Common parts of a block of flats or HMO | Yes (common parts only) | s.35 does not bite: common parts are not "in a dwelling-house" | AIA or WDA on communal plant and integral features (s.33A) |
| Commercial property (offices, shops, warehouses) | Yes (full base) | UK property business is a qualifying activity (s.15(1)(b)); s.35 does not apply to non-dwelling space | AIA, 40% FYA (s.45U), full expensing for companies (s.45S), WDA, SBA |
| Mixed-use (for example a shop with a flat above) | Partly | s.35 bars the dwelling part; the commercial part qualifies | Apportion on a just and reasonable basis (floor area or heat output) |
| HMO or serviced accommodation with substantial services | It depends | May be a trade if services are substantial; otherwise an ordinary property business with s.35 applying | Get advice on trade status before claiming inside the lets |
| Former furnished holiday let (after April 2025) | No new claims | FHL regime abolished, Finance Act 2025 Sch 5; now ordinary residential with s.35 applying | Grandfathered pools continue WDA; no new FHL plant qualifies |
Standard residential buy-to-let: why the answer is usually no
For a standard residential let, you cannot claim plant and machinery allowances on anything inside the dwelling. The boiler, the fitted kitchen, the bathroom suite, the carpets and the white goods are all plant for use in a dwelling-house, and s.35 takes them straight out of qualifying expenditure. This is a statutory rule in CAA 2001, not an informal HMRC view, and it is not a date-stamped concession that came in for a particular tax year. The dwelling-house bar applies to the whole UK property business.
That does not leave you with nothing. Two routes do the work that capital allowances would in a commercial setting. The first is replacement of domestic items relief, which gives a deduction when you replace (not initially provide) free-standing furniture, white goods, soft furnishings and similar items in a let dwelling. The second is the ordinary revenue-repairs deduction for fixing what is already there. Keep those two clearly separate from capital allowances, and keep both separate again from finance-cost relief under Section 24, which restricts mortgage interest to a basic-rate tax reducer and is a different regime entirely.
Common parts of a block or HMO: the carve-out that does qualify
The dwelling-house bar is narrower than it first looks. It removes plant for use in a dwelling-house, and the communal areas of a multi-unit building are not a dwelling-house. A communal boiler serving the whole block, a shared lift, stairwell and corridor lighting, a communal fire-alarm and entry system: these sit outside the dwellings, so they can qualify for AIA or writing-down allowances, and any integral features among them (a communal electrical system, for example) go into the special-rate pool under CAA 2001 s.33A.
If you own a block of flats or a larger HMO, this is your practical claim base. The line to hold is precise: plant inside a let room or flat is barred; plant in genuinely communal space is not. For how to identify and apportion that communal plant, see the s.35 common-parts claim mechanics for multi-tenant property.
Commercial property: the full claim base
Commercial property is where capital allowances do real work. A UK property business holding offices, shops, warehouses or industrial units is carrying on a qualifying activity under s.15(1)(b), and because the space is not a dwelling, s.35 does not apply. You do not need the letting to be a trade for this to work, which corrects a common misconception: the property business itself is enough.
What qualifies in commercial space includes heating and ventilation, air conditioning and cooling, fire-alarm and security systems, sanitary fittings, kitchen equipment and certain electrical plant. The electrical and cold-water systems, space and water heating, lifts, escalators and external solar shading are integral features and sit in the special-rate pool at 6%. The bare shell, the structural works and the land never qualify as plant.
On the allowances themselves, the AIA gives a 100% deduction for qualifying plant up to a permanent £1,000,000 limit (CAA 2001 s.51A(5), made permanent by Finance (No. 2) Act 2023 s.8). There is also a 40% first-year allowance on new and unused main-rate plant for expenditure on or after 1 January 2026 (Finance Act 2026 s.29, inserted as CAA 2001 s.45U), and companies have 100% full expensing on new main-rate plant under s.45S. To work out the amount once you know the space qualifies, see capital allowances on property, the detail on the Annual Investment Allowance, and the commercial-specific list of what you can claim on commercial property.
Worked example: a small retail unit. Say you let a small retail unit through an unincorporated property business and spend £40,000 fitting out qualifying plant and integral features. Because this is commercial, non-dwelling space, the spend is qualifying expenditure. The £40,000 sits comfortably within the £1,000,000 AIA limit, so you can claim the whole £40,000 as a 100% deduction in the year of spend, and the relief reduces your taxable profit at your marginal income tax rate. If part of the spend were better matched to the 40% first-year allowance or, for a company, to full expensing, the choice between them is a planning point worth taking advice on before you file the return.
Mixed-use property: how to apportion
Mixed-use buildings need the cleanest record-keeping of all. You claim on the commercial part and not on the dwelling part, and where a single asset serves both, you apportion. The classic pattern is a shop on the ground floor with a let flat above. The shop is non-dwelling space, so plant there qualifies; the flat is a dwelling, so plant there is barred by s.35.
For assets that genuinely serve both, s.35(3) requires a just and reasonable apportionment, and HMRC expects a defensible basis: floor area is the usual starting point, heat output or metered consumption can be more accurate for a heating system. Document the basis at the time, not in hindsight.
Worked example: a boiler serving both floors. Say you own a building with a shop on the ground floor and a let flat above, and you install a £12,000 boiler that heats both. If floor area splits the building 60% commercial and 40% residential, you claim allowances on £7,200 (the commercial proportion) and the £4,800 attributable to the flat is barred by s.35. The £7,200 can be covered by AIA in the year of spend.
HMOs and serviced accommodation: the grey area after FHL abolition
HMOs and serviced lets attract more confusion than any other category, partly because the furnished holiday let regime that some of them relied on no longer exists. Most HMOs and serviced lets are now ordinary property businesses, which means the s.35 bar applies to plant inside the let rooms while the common-parts carve-out still rescues communal plant.
The one route to a wider claim base is trade status. Where the level of service genuinely tips the activity into a trade (think a managed operation with daily cleaning, catering and concierge rather than a furnished let with a cleaner between bookings), the dwelling-house bar can fall away and the full plant base reopens. That is a fact-specific judgement, and the fact patterns are closely argued. Do not assume trade status because the property is marketed as serviced accommodation; take advice on the activity before claiming anything inside the lets.
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Former furnished holiday lets: what changed in April 2025
The furnished holiday let regime was abolished by Finance Act 2025 Schedule 5, taking effect for income tax from 6 April 2025 and for corporation tax for accounting periods beginning on or after 1 April 2025. The standalone FHL qualifying activity in s.15 was removed, so a former FHL is now an ordinary residential property business and the s.35 dwelling-house bar applies in full. No new plant inside the dwelling qualifies.
What survives is the grandfathered position. Plant pools built up while the property was an FHL are carried into the ordinary property business and continue to be written down, so historic claims are not clawed back simply because the regime ended. Two consequences follow: you keep getting writing-down allowances on those existing pools, but new spend inside the dwelling is barred; and a later sale can still trigger a balancing charge on the grandfathered pools. If you ran an FHL up to abolition, the transitional treatment is worth reviewing rather than assuming the allowances simply disappeared.
Leasehold and property improvements: does fitting out qualify?
A commercial tenant or leaseholder who fits out leased space can claim capital allowances on leasehold property improvements, because the lessee incurs the expenditure on plant for its own qualifying activity. The plant and integral features the tenant installs qualify; the building shell and structural alterations do not, because s.21 (List A) and s.22 (List B) keep the fabric of the building out of plant. Where the work is new non-residential construction rather than plant, the Structures and Buildings Allowance can give 3% a year instead, on a separate basis.
The dwelling line holds here too. Improvements inside a residential dwelling, whether by landlord or tenant, remain barred by s.35. So a tenant fitting out a ground-floor shop has a claim; a landlord upgrading a let flat does not, and falls back to the replacement and repairs routes.
Selling the property: balancing charges and the s.198 election
Capital allowances do not end neatly at sale. A disposal that includes fixtures triggers disposal values on the plant pools under CAA 2001 s.61 and the s.196 fixtures Table, which can produce a balancing charge clawing back allowances already claimed. For a commercial buyer to claim on the same fixtures, two gates must be passed: the seller must have pooled the expenditure, and the parties must fix its value, usually by a joint s.198 election made within two years of completion (the time limit is in CAA 2001 s.201). Miss those, and the buyer's expenditure is treated as nil under s.187A(3), stranding the allowances for the property's remaining life.
For the buyer-side and seller-side detail, including how to embed the election in the sale agreement, see our guide to the s.198 fixtures election on purchase.
Where to go next once you know you can claim
Eligibility is only the first decision. Once you know a property type supports a claim, the next questions are how much, which pool, and which allowance gives the best result this year. For those, work through capital allowances on property, the AIA mechanics, the current writing-down allowance rates, and, if you hold property through a company, full expensing. If you are a company landlord weighing full expensing against the 40% first-year allowance, that choice sits alongside the wider limited company buy-to-let picture.
The rates that matter here, and where to find the detail behind each one:
| Allowance | Rate or amount | Key condition | Where to go for the detail |
|---|---|---|---|
| Annual Investment Allowance | £1,000,000 (permanent) | 100% in year of spend on qualifying plant; per business, not per property | Annual Investment Allowance guide |
| Main-pool writing-down allowance | 14% reducing balance (from April 2026; was 18%) | FA 2026 s.28; straddling-period hybrid rate | Writing-down allowance rates |
| Special-rate pool WDA | 6% reducing balance (unchanged) | Integral features (s.33A) | Writing-down allowance rates |
| 40% first-year allowance | 40% in year of spend | New and unused main-rate plant on or after 1 Jan 2026; excludes cars and second-hand assets | Full expensing and FYA guide |
The rules reward precision, and the cost of getting the eligibility test wrong is a barred claim or an HMRC enquiry. If you hold commercial, mixed-use or multi-unit property and are not sure where your claim base starts and stops, our team can review your position and point you to the right allowance. Get in touch to talk it through.