Are Letting Agent Fees Tax Deductible?
Management commission, tenant-find, inventory and renewals — all allowable. Why gross rent and gross fees decide your MTD threshold.
The short answer
Yes — fully. Tenant-find fees, monthly management commission, inventory and check-out fees, referencing, renewal fees and rent-collection charges are all allowable. Deduct the gross fee, and declare the gross rent — never just the net amount the agent pays over.
The tax treatment of agent fees is simple; the bookkeeping is where landlords go wrong. Your agent’s statement shows rent collected, fees deducted and a net payment to you. HMRC wants the first two numbers, not the third.
What is allowable
| Fee | Treatment |
|---|---|
| Full management commission (typically 8–15% + VAT) | Allowable |
| Tenant-find / let-only fee | Allowable |
| Inventory, check-in, check-out, referencing, deposit registration | Allowable |
| Tenancy renewal and rent-review fees | Allowable |
| Advertising and marketing the property | Allowable |
| Agent fees for a first letting on a lease of more than one year | Capital under HMRC practice — rare for ASTs |
| Agent fees on buying or selling the property | Capital — CGT base cost / disposal cost |
Gross rent, gross fees
If the agent collects £12,000 of rent, deducts £1,440 of fees and pays you £10,560, your records must show income £12,000 and an expense of £1,440. Reporting £10,560 as rent understates turnover — which matters for the £50,000 / £30,000 / £20,000 MTD thresholds (tested on gross income) and for the £1,000 property allowance decision.
VAT on fees
Unless you are VAT-registered for a commercial letting business (rare), the VAT on agent fees is simply part of the cost — deduct the VAT-inclusive amount.
Worked example
Rent £12,000; management 10% + VAT = £1,440; tenant-find £450; inventory £120 — £2,010 of allowable fees in 2026/27.
| Deducting £2,010 in 2026/27 | Effect |
|---|---|
| Basic-rate landlord (20%) | £402 less tax |
| Higher-rate landlord (40%) | £804 less tax |
| Additional-rate (45%) | £904 less tax |
| From April 2027 (property rates 22/42/47%) | slightly more — the deduction is worth more as rates rise |
What to keep
The invoice describing the work, proof of payment, and — for anything near the repair/improvement line — a sentence in your records saying what was there before. HMRC enquiries into landlord expenses turn on that single fact. Digital copies satisfy MTD’s record-keeping rules.
Where it goes under Making Tax Digital
If you are inside MTD for Income Tax (mandated from April 2026 above £50,000 gross), the cost belongs in your quarterly update under the matching expense category, in the quarter you paid it (cash basis is the default for landlords). Get the category right now — the final declaration only tidies totals, it does not re-classify. Check whether MTD applies to you.
HMRC PIM2120 (letting agent and professional fees) · gov.uk MTD qualifying income rules (gross income) · rates from our verified 2026/27 dataset. Checked 31 Aug 2026.
Quick answers
Yes — management commission, tenant-find, inventory, referencing, renewal and marketing fees are all allowable expenses of the rental business.
The full (gross) rent. Show the agent's fees as an expense. Declaring only the net payment understates your income and can put you on the wrong side of the MTD thresholds, which test gross income.
Fees you paid are deductible if incurred for your rental business; fees paid by the seller are not yours to claim.
Box 27 — legal, management and other professional fees.