HMOs (Houses in Multiple Occupation)
Capital allowances are a valuable form of tax relief available to businesses in the UK, allowing them to deduct the cost of qualifying capital expenditure from taxable profits. While residential property does not typically qualify, HMOs operate differently from standard buy-to-let properties and can offer opportunities to claim allowances—but only on communal areas and certain qualifying assets.
If you own an HMO that operates as a business, you may be eligible to claim capital allowances on elements of your investment, helping to reduce your tax liability and improve cash flow.
Who Can Claim Capital Allowances on HMOs?
Capital allowances are only available to those who own and operate HMOs as a business, such as:
✔ Landlords who rent out HMO properties (3 or more unrelated tenants).
✔ Limited companies that own and manage HMOs.
✔ Investors who have converted properties into HMOs and incurred qualifying expenditure.
What Qualifies for Capital Allowances in an HMO?
Capital allowances cannot be claimed on the property purchase itself, but certain communal and business-related areas may qualify.
Eligible Items (Communal Areas Only)
You can typically claim capital allowances on:
- Shared spaces: Hallways, staircases, lounges, laundry rooms.
- Kitchens and bathrooms do not qualify unless there is a kitchen and bathroom within each unit
- Plant & machinery: Heating systems, electrical installations, plumbing, ventilation.
- Fire safety systems: Alarms, smoke detectors, emergency lighting.
- Security systems: CCTV, access control systems, intercoms.
- Lighting & electrical: Wiring, sockets, communal lighting.
- Carpets in common areas
Non-Eligible Items
The following do not qualify for capital allowances:
- The building structure itself (walls, floors, ceilings).
- Fixtures & fittings within tenant bedrooms.
- Furniture, and soft furnishings (unless used in a serviced HMO).
- Carpets (Unless they are in common areas)
Maximising Your Capital Allowances
If your HMO provides additional services beyond standard renting, it may be possible to increase the scope of capital allowance claims. This applies if you offer:
✔ Serviced accommodation (e.g., regular cleaning, linen changes, security).
✔ Short-term lets with frequent tenant turnover.
✔ Fully managed accommodation with additional support services.
If your HMO is structured as a business with commercial elements, you could be entitled to claim more tax relief.
How Much Could You Claim?
The amount you can claim depends on the size of your HMO, the extent of qualifying expenditure, and how the property is structured. A professional capital allowances review can help identify unclaimed tax relief and ensure you maximise your entitlement.
We specialise in reviewing HMOs and investment properties to identify hidden tax relief opportunities.
How CA Select Can Help
At CA Select, we work with HMO landlords and investors to:
Identify qualifying capital allowances within communal areas
Assess refurbishment costs to maximise claims.
Ensure compliance with HMRC regulations.
Provide expert guidance on structuring future investments.
If you own or are converting an HMO and want to explore capital allowances, get in touch with us today.
