Are renovations on my Airbnb property tax deductible?
If you’ve recently given your Airbnb property a makeover, you’re probably wondering how those changes impact your tax obligations.*
The good news is that giving the kitchen a new coat of paint or adding a garage could lead to some handy tax deductions. If you’re curious to find out how your next renovation project could lower your tax bill, our partners at TaxScouts have created a useful guide below.
Repairs versus improvements: what’s the difference?
When it comes to tax deductions for your Airbnb property, not all spending is created equal. To make the most of your expenses, it’s important to understand the difference between repair costs and capital improvements, and how each one is treated by HMRC.
Repairs and maintenance costs
These are minor fixes that keep your property in good condition, like replacing a broken chair or repainting walls.
The good news? These costs can generally be deducted immediately as operating expenses, reducing your taxable income for the year and putting some extra cash back in your pocket for your next renovation project.
To claim these expenses, just include them under “business expenses” when filing your Self Assessment tax return. Make sure you keep all receipts and invoices related to repairs and file before January 31st to avoid any late filing penalties.
Capital improvements
These are the big-ticket items, e.g. things that enhance your property’s value, like adding a pool, building an extension, or completely renovating a kitchen.
Unlike repairs, these costs aren’t deductible straight away. Instead, they’re added to your property’s value and will help reduce your Capital Gains Tax (CGT) when you sell.
So, while you won’t see the tax benefit immediately, those improvements can save you money down the line when it’s time to cash out. Just be sure to keep all receipts and documentation to support your claims.
Now that you know the difference, you’ll be able to make smarter decisions with your renovations.
From fixes to upgrades: what counts as what?
Here’s a breakdown of common renovations and improvements, and whether they qualify as a repair or an improvement:
| Example | Repair | Improvement |
| Replacing a broken window | ✅ | |
| Fixing a leaky roof | ✅ | |
| Adding a new bathroom | ✅ | |
| Building an extension | ✅ | |
| Adding a swimming pool | ✅ | |
| Replacing broken furniture | ✅ | |
| Adding a loft conversion | ✅ | |
| Mending a broken fence | ✅ |
How this applies to Airbnb properties
For your Airbnb property, repairs can typically be deducted right away, lowering your tax bill for the year. But improvements will bump up your property’s value and help reduce your capital gains tax when you eventually sell.
So, whether you’re patching up a roof or building an extension, make sure you track repairs and improvements separately.
Which improvements offer the best tax benefits?
Some upgrades not only boost your property’s value but also save you money on taxes. For example:
- Energy-efficient upgrades: installing energy-efficient appliances and renewable energy systems (e.g.solar panels, energy-efficient boilers) could help you claim capital allowances. These allowances can reduce your taxable profits and are available for businesses or rental properties.
- Long-term improvements: enhancing your property with durable features like high-quality flooring or a new roof might not qualify for immediate tax deductions, but these improvements increase the property’s value and can reduce your CGT when you sell. For example, building an extension and treating it as capital improvement will reduce the CGT you pay later.
In a nutshell, making the right upgrades not only improves your Airbnb property but also provides long-term financial benefits.
Changes to the Furnished Holiday Let regime
As of 1 April 2025, the Furnished Holiday Let (FHL) regime will undergo significant changes that could affect your tax planning. The 2024/2025 tax year will be the final year to take advantage of the current tax benefits and separate reporting requirements before tax relief for FHLs is abolished.
Here’s a rundown of the key changes you should know about:
- Loan interest will be capped at the basic Income Tax rate
- Capital allowances won’t be available for new expenditure
- FHLs will be eligible for the replacement of domestic items relief
- There will be no tax relief on eligible gains for trading business assets
- FHL income will be excluded from UK earnings for pension relief
These changes mark the end of the current FHL tax benefits and reporting requirements, making it more important than ever to plan ahead and adjust your tax strategy.
Tax Tips for Hosts on Airbnb
Maximising your Airbnb tax savings comes down to smart record-keeping and making the most of allowable expenses. For example, you should:
- Keep detailed records: track receipts, invoices, and work dates. Organised records will help you claim all possible deductions when it’s time to file your tax return.
- Categorise expenses correctly: know the difference between repairs and improvements. Keeping these categories distinct will help you maximise your current-year deductions.
- Consult a tax professional: tax rules can be tricky, so it’s always a good idea to consult with a tax professional like TaxScouts, who can guide you through the details. They can provide advice on what qualifies for immediate deductions, guide you on capital allowances, and ensure you’re following the most recent tax rules.
- Maximise allowable expenses: don’t forget about the additional expenses that are often overlooked. Utility costs, insurance, and even the cleaning fees you pay can sometimes be deducted.
- Stay on top of deadlines: Make sure you’ve registered for Self Assessment by 5th October and then submit your online Self Assessment by 31st January. Missing deadlines could result in late penalties, so make sure you’re organised and prepared in advance.
Renovating your Airbnb property can offer both immediate and long-term tax advantages. By staying organised, categorising expenses properly and consulting experts when needed, you can make the most of your tax-deductible renovations and maximise your financial returns.
Next Steps
If you’d like support from a tax professional, you can contact TaxScouts. Hosts on Airbnb can claim a 10% discount on their first TaxScouts tax return or tax consultation.
*We strongly recommend that you do your own research as the information in this article is not comprehensive and does not constitute legal or tax advice. As we do not update the articles in real-time, please check each source and make sure that the information provided has not recently changed.