Are Selective Licence Fees Tax Deductible? (2026)
Last updated 27 June 2026 · 7 min read · By the LandlordTaxAi Editorial Team
The short answer
Yes — generally. Selective and additional licensing fees under the Housing Act 2004 are usually allowable revenue expenses of your rental business, deductible against rental income, because they’re a recurring regulatory cost of letting rather than a capital improvement. The important exception: fines and penalties for letting without a required licence are not deductible.
More and more councils run selective licensing schemes, and the fees aren’t trivial. The good news is that, for tax, a licence fee is normally a straightforward allowable cost of running your lettings business. This guide explains the treatment, the renewal question and the penalty trap.
See also allowable expenses for landlords and HMO licence fees and tax.
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Rental Profit Calculator
Include your selective/additional licence fee as an allowable expense to see the effect on taxable profit.
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
Licence fees are generally allowable revenue expenses. Penalties for non-compliance are not. Estimate only.
Why the fee is allowable
To be deductible, an expense must be incurred wholly and exclusively for the rental business and be revenue rather than capital. A selective licence fee meets both: you pay it specifically to let the property legally, and it’s a recurring cost of carrying on the business — not an improvement to the asset. So it reduces your taxable rental profit in the normal way.
Treat a selective or additional licence fee like other regulatory costs of letting — it goes among your allowable property expenses.
First licence, renewals and HMOs
Selective licences typically last up to five years. Whether it’s your first application or a renewal, the fee is generally treated as revenue — it’s a cost of continuing to let, not the purchase of a lasting asset. HMO licence fees (mandatory or additional) follow the same logic and are usually allowable on the same basis.
| Cost | Tax treatment |
|---|---|
| Selective licence application fee | Allowable revenue expense |
| Selective licence renewal | Allowable revenue expense |
| Additional / HMO licence fee | Allowable on the same basis |
| Fine for letting unlicensed | NOT allowable (penalty) |
| Civil penalty / prosecution costs | NOT allowable |
The bright line: the licence fee is deductible; any penalty for non-compliance is not. Get licensed on time and the cost is allowable.
How to claim it
Include the fee in your allowable property expenses — in the year you pay it on the cash basis (the default for most landlords), or the period it relates to on the accruals basis. Keep the council’s receipt. Under MTD, record it digitally in the appropriate expense category so it flows into your quarterly figures.
Never miss an allowable expense
LandlordTaxAi reads your bank statements and categorises costs like licence fees against the right HMRC category — so your deductible expenses are captured and MTD-ready.
See how it worksA worked example
A landlord pays a £700 selective licence fee in 2026/27.
| Selective licence fee paid | £700 |
| Treatment | Allowable revenue expense |
| Tax saved (basic-rate landlord, 20%) | £140 |
| Tax saved (higher-rate, 40%) | £280 |
Claiming the fee reduces taxable profit; a fine for letting without the licence would not have been deductible.
Frequently asked questions
Are selective licence fees tax deductible?
Generally yes — selective and additional licensing fees under the Housing Act 2004 are usually allowable revenue expenses deductible against rental income.
What about the first licence versus a renewal?
Both are commonly treated as revenue — a cost of carrying on the letting business rather than an asset improvement.
Are HMO licence fees treated the same way?
Yes — mandatory and additional HMO licence fees are generally allowable on the same revenue basis.
Can I claim fines for letting without a licence?
No. Penalties and fines for non-compliance are not allowable — only the legitimate licence fee itself.
How do I claim the licence fee?
Include it in allowable property expenses for the relevant year, keep the council receipt, and record it digitally under MTD.
Should I spread the cost over the licence period?
On the cash basis you claim it when paid; on accruals you might match it to the period covered. Either way it’s a revenue cost.
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: 27 June 2026 · Researched against primary UK sources for the 2026/27 tax year: https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income; https://www.gov.uk/renting-out-a-property/houses-in-multiple-occupation. This article is informational only and does not constitute tax advice. Check the latest details on GOV.UK or with a qualified accountant.