Are EPC Upgrade Costs Tax Deductible for Landlords? (2026/27)
Last updated 24 June 2026 · 8 min read · By the LandlordTaxAi Editorial Team
The short answer
Most EPC and energy-efficiency upgrades are capital improvements — they enhance the property, so you can’t deduct them from rental income. Instead they reduce your Capital Gains Tax when you sell. Genuine like-for-like repairs (e.g. fixing existing insulation) remain deductible as revenue.
With minimum energy-efficiency standards tightening, many landlords face spending on insulation, heating and windows to lift a property’s EPC rating. The natural assumption is that it’s all a deductible expense — but for most upgrades, it isn’t. HMRC treats improvements as capital, which changes when and how you get relief.
This guide explains the capital-versus-repair line for EPC work in 2026/27, and how to record it. For the wider rules, see allowable expenses for landlords.
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Rental Profit Calculator (Repairs vs Improvements)
Add deductible repairs to see your taxable rental profit — capital improvements are kept for CGT.
Result
- Taxable profit (rent − expenses)
- £11,200
- Income Tax at 20%
- £2,240
- Less mortgage interest credit (20%)
- − £1,000
- Tax due on this property
- £1,240
- Income after tax
- £9,960
EPC improvements are usually capital (reduce CGT). Like-for-like repairs are deductible. Estimate only.
Why most EPC upgrades are capital
The tax test is whether the work improves the property beyond its previous condition (capital) or simply restores it (revenue repair). Energy-efficiency upgrades usually add something new or better, so they fall on the capital side.
Capital costs can’t be deducted from your rental profit. The relief comes later: they’re added to the property’s base cost and reduce your Capital Gains Tax when you sell.
- Installing insulation where there was none — capital
- Upgrading single-glazing to double-glazing — usually capital (improvement)
- A new, more efficient heating system that’s an upgrade — capital
- Adding solar panels — capital
Note: the old Landlord’s Energy Saving Allowance, which gave a deduction for some insulation, ended in 2015. There’s no special revenue deduction for energy improvements now — the capital/repair test governs.
When EPC-related work IS deductible (repairs)
Not everything that touches energy efficiency is capital. If you’re repairing or replacing like-for-like something that already existed, it’s a revenue repair and deductible now.
| Work | Likely treatment |
|---|---|
| Replacing a broken boiler with an equivalent | Revenue repair — deductible |
| Repairing existing insulation or draught-proofing | Revenue repair — deductible |
| Like-for-like replacement windows (modern equivalent) | Often revenue — deductible |
| First-time insulation / glazing upgrade / new system | Capital — not deductible from rent |
Modern materials don’t automatically make a replacement an improvement — HMRC accepts using the nearest current equivalent. But a significant upgrade in standard tips it into capital.
Recording EPC costs and the bigger picture
Under Making Tax Digital, deduct genuine repairs in your quarterly update; keep capital improvement costs out of your rental figures and log them against the property for CGT.
Minimum energy-efficiency standards mean this spending is increasingly unavoidable, so track every improvement carefully — it may not help now, but it cuts the CGT bill on sale. See the CGT property calculator for how capital improvements reduce your gain.
Get EPC spending in the right column
LandlordTaxAi distinguishes repairs from improvements on your energy works — deducting what’s allowable now and saving the rest to cut your future CGT.
See how it worksA worked example
To improve an EPC rating, Tariq spends £6,000 adding wall insulation and new double-glazing, and £800 repairing the existing boiler (2026/27).
| Wall insulation (new) + double-glazing upgrade | £6,000 capital — not deductible from rent |
| Boiler repair (like-for-like) | £800 revenue — deductible now |
| Off rental profit this year | £800 |
| Saved for CGT on future sale | £6,000 |
Tariq deducts the £800 repair now, but the £6,000 of improvements waits to reduce his Capital Gains Tax when he eventually sells.
Frequently asked questions
Can I deduct EPC upgrade costs from rental income?
Usually no. Energy-efficiency improvements are capital, so they reduce your CGT on sale rather than your rental profit. Genuine repairs are deductible.
What’s the difference between a repair and an improvement?
A repair restores the property (deductible); an improvement makes it better than before (capital). EPC upgrades usually improve, so they’re capital.
Is replacing single-glazing with double-glazing deductible?
Often it’s treated as a capital improvement. Like-for-like replacement with the modern equivalent can be a repair — it depends on whether it’s a genuine upgrade.
Is there a special allowance for energy improvements?
No. The Landlord’s Energy Saving Allowance ended in 2015. The normal capital-versus-repair test now decides relief.
Do capital EPC costs give any relief?
Yes — later. They’re added to the property’s base cost and reduce your Capital Gains Tax when you sell, so keep every invoice.
How do I record EPC work under MTD?
Deduct genuine repairs in your quarterly update; keep capital improvements out of your rental figures and log them against the property for CGT.
Written and reviewed by the LandlordTaxAi Editorial Team. Our guides are reviewed against current HMRC guidance and updated when the rules change. Operated by LandlordTaxAi, United Kingdom. Follow us on LinkedIn.
Last reviewed: 24 June 2026 · Researched against primary UK sources for the 2026/27 tax year: https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2030; https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income; https://www.gov.uk/guidance/domestic-private-rented-property-minimum-energy-efficiency-standard-landlord-guidance. This article is informational only and does not constitute tax advice. Check the latest details on GOV.UK or with a qualified accountant.