Pre-Letting Expenses — Before the First Tenant
Revenue costs from up to seven years before letting count on day one; refurbishing a run-down purchase is capital. The seven-year rule and the Law Shipping trap.
The short answer
Yes, within seven years — if they are revenue. Costs incurred before your first tenant that would have been allowable had the business already started are treated as incurred on day one of letting: insurance, safety certificates, agent fees, minor repairs, advertising. Costs of making a run-down property fit to let are capital.
The rental business starts when you first let (or first make the property available to let). Everything before that is “pre-commencement” — and the law lets you bring qualifying revenue costs from the previous seven years into the first year.
The test
Would the cost have been allowable if the business were running? If yes, and it was incurred within seven years before the start, it is deductible on the first day. If it is capital — purchase costs, refurbishment that makes the property lettable, furniture first bought — it is not, but it joins your CGT base cost.
| Pre-letting cost | Treatment |
|---|---|
| Gas safety, EICR, EPC before first let | Allowable (pre-commencement revenue) |
| Insurance and council tax before the first tenant | Allowable |
| Tenant-find and referencing fees | Allowable |
| Minor repairs and redecoration of a property already in lettable condition | Allowable |
| Full refurbishment of a run-down purchase (the price reflected its state) | Capital |
| First purchase of furniture and appliances | Capital (not deductible; replacement relief later) |
| Conveyancing, SDLT, survey on purchase | Capital — CGT base cost |
| Mortgage interest before first let | Section 24 credit — from the first year of letting |
The “Law Shipping” trap
HMRC’s long-standing position (from a case about a dilapidated ship) is that if you bought a property cheaply because it needed work, the work to bring it to a usable state is capital even if it looks like repairs. If the property was let by the previous owner and usable on day one, ordinary repairs remain revenue.
Worked example
Before first letting in 2026/27: EICR £220, EPC £70, gas check £85, insurance £380, tenant-find £450, minor repairs £600 — £1,805 treated as incurred on the first day of letting.
| Deducting £1,805 in 2026/27 | Effect |
|---|---|
| Basic-rate landlord (20%) | £361 less tax |
| Higher-rate landlord (40%) | £722 less tax |
| Additional-rate (45%) | £812 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.
ITTOIA 2005 s.57 as applied to property businesses by s.272 (pre-commencement expenses, seven years) · HMRC PIM2505 · Law Shipping Co v IRC (1923) via PIM2030 · rates from our verified 2026/27 dataset. Checked 31 Aug 2026.
Quick answers
Yes — revenue expenses from up to seven years before letting starts are treated as incurred on the first day of the business, provided they would have been allowable anyway.
Usually not. Work that makes a run-down purchase fit to let is capital. Ordinary repairs to a property that was already lettable are revenue.
No — the initial purchase is capital. Replacing those items later qualifies for replacement of domestic items relief.
Include them in the relevant expense boxes of the first year's SA105 (or first MTD quarter), as if paid on the first day of letting.